The Organisation for Economic Co-operation and Development (OECD) has raised India's GDP growth projection for the current fiscal by 80 basis points to 7.1%, marking a significant upgrade from its June projection of 6.3% for FY2027. According to The Times of India, the Paris-based inter-governmental body cited resilient domestic demand and government policies that cushioned households and firms from the impact of higher energy prices as key drivers of the upward revision. OECD noted that growth in several G20 emerging market economies, including India, was underpinned by resilient domestic demand and government policies that cushioned households and firms from the impact of higher energy prices. The OECD's 7.1% projection for FY27 is the highest among international agencies, with the Asian Development Bank (ADB), S&P and Moody's projecting 7% GDP expansion, while Fitch Ratings estimates 6.9%. OECD also projects growth to fall from 7.8% in FY2025-26 to 7.1% in FY2026-27 and 6.5% in FY2027-28 in annual terms, with reduced purchasing power expected to weaken growth in India through the second half of this year before a gradual recovery takes place in 2027.
The upward revision comes after India recorded stronger-than-expected growth in the first quarter of FY27, with GDP growing 7.8% year-on-year during the quarter. As per The Times of India, services remained a major driver of growth, expanding 10%, with financial, real estate and professional services growing 12.1%. Manufacturing also recorded strong growth of 9.2%, helped by electronics, textiles, and rubber and plastics. Investment and exports also supported economic activity, with gross fixed capital formation rising 11.9% in the first quarter, its fastest growth in four years, backed by both public and private investment. Exports of goods and services increased 12%, while consumption remained resilient, supported by rural and urban demand, lower tax rates, higher subsidies and limited pass-through of higher input costs to consumers. India's economy grew 7.8% in the April-June quarter, with strong investment and manufacturing activity helping offset weakness in mining and consumer-facing services, as reported by Reuters. India's goods exports have maintained momentum with double-digit growth in each of the last five months of the financial year, with merchandise exports reaching $216 billion in April-August, up nearly 18% year-on-year, according to Business Standard.
The OECD upgrade follows similar revisions from other major institutions, with S&P Global Ratings raising its FY27 growth forecast to 7% from 6.6%, citing robust industrial activity, consumption, goods exports and accelerating government investment. According to The Times of India, S&P expects growth to ease in the second half of the fiscal year as the impact of GST rationalisation and income-tax cuts fades. S&P also projected consumer inflation at 5.1% in FY27 and said the Reserve Bank of India could raise its policy rate by 25 basis points during the fiscal year. Fitch Ratings raised its FY27 growth forecast to 6.9%, from 6.4%, citing strong June-quarter growth and the resilience of the Indian economy. Fitch expects private investment to strengthen, with investment growth projected at more than 10%. The Reserve Bank of India's FY27 growth estimate stands at 6.7%, compared with the economy's 7.8% growth in FY26. Moody's had also raised its FY27 real GDP growth forecast to 7% from 6%, citing India's resilience amid the Middle East conflict, as reported by The Times of India. Last week, Moody's Ratings had also raised its GDP growth projection for India to 7% for 2026-27 (FY27), as noted by Business Standard. All five global agencies' growth forecasts are now above the Reserve Bank of India's projection of 6.7% for FY27.
The OECD has lowered its FY27 inflation forecast to 4.7% from the earlier projection, noting that the rise has been more gradual and previously anticipated. According to The Times of India, OECD projects inflation in India to average 4.7% in 2026, with government price support measures mitigating energy price pressures and continuing to do so in the near-term. S&P Global expects consumer inflation to average around 5.1% in FY27, which it said could prompt the RBI to raise the repo rate by 25 basis points. Fitch expects retail inflation to rise to 5.5% by December this year before easing to 4.2% by end-2027 and 4% by end-2028. Fitch expects the RBI to raise rates by 25 bp in October this year to 5.5%, with further rises to 5.75% in early 2027 and then for rates to ease back to 5.5% in 2028. ADB expects the MPC to announce a modest repo rate hike in FY27, with the forecast assuming that the monetary policy stance will remain neutral, though as consumer inflation remains above the 4% monetary policy target, a modest rate hike later in FY27 is likely if commodity price inflation spills over into the consumer price index. Although at a 20-month high of 4.82% in August, India's retail inflation has remained close to the RBI's target, though wholesale inflation has hovered very close to 10% in the last four months since May.
ADB expects investment to remain firm, supported by relatively low interest rates, higher public capital spending and healthy corporate balance sheets. According to The Times of India, the Reserve Bank of India (RBI) cut the repo rate by 125 basis points between February and December 2025, with the weighted average lending rate on fresh rupee loans falling by 80 basis points between February 2025 and June 2026. Private investment is also expected to stay strong in sectors such as data centres and energy, where project pipelines remain robust. Central government capital expenditure is on track to meet the FY2026 budget target of 11.5% growth, with private investment expected to pick up, supported by government measures to enhance the investment climate, including improvements in logistics infrastructure, regulatory reforms, and a strong pipeline of projects. ADB expects FY28 growth at 7.1%, slightly lower than its earlier 7.3% projection, largely because of the stronger base created by higher FY27 growth. ADB has lowered its growth projection for FY28 to 7.1% from 7.3% earlier, citing increased global economic uncertainty. ADB expects private investment growth may moderate in FY28 due to global economic uncertainty but is expected to remain strong in select sectors such as data centers and energy, where the investment pipeline is still robust.
OECD projects global growth at 2.9% in 2026, noting that growth moderated in the first half of 2026, but remained resilient in many countries despite the adverse effects from the conflict. As reported by The Times of India, OECD said global economic prospects remain 'heavily dependent' on whether a durable resolution to the Middle East conflict is achieved. Persistent uncertainty about the evolution of the Middle East conflict remains a key risk to the baseline projections. OECD also noted that structural policy reforms that enhance the ability of economies to cope with supply side disruptions are also a key priority for governments at the current juncture. Fitch expects the rupee to remain broadly around current levels against the US dollar for the rest of 2026, before depreciating slightly next year, while raising its global GDP growth forecast by 20 basis points to 2.6%. The OECD's projection reflects India's continued resilience, supported by strong infrastructure spending and growth-supporting fiscal and monetary policies, with continued strength in the services sector including AI-related investments.
