Rating agency ICRA has revised India's FY27 GDP growth forecast down to 6.2% from the earlier estimate of 6.5%, citing elevated crude oil prices triggered by the West Asia crisis. According to reports from ICRA, the agency now assumes crude oil prices to average at $95 per barrel in fiscal 2027, against their prior estimate of $85 per barrel, given the ongoing stickiness in prices amid the stalemate in West Asia. As reported by ICRA Chief Economist Aditi Nayar, "Consequently, we have pared our baseline forecast for the FY27 GDP growth (at constant 2022-23 prices) to 6.2% from the 6.55 expected earlier." The latest developments show Brent crude has surged past $105 per barrel, sending shockwaves through energy-dependent economies and prompting state-run fuel retailers to hike petrol and diesel prices by 90 paise on Tuesday, marking the second major increase within a week.
For the current fiscal year 2026, ICRA estimates GDP growth at 7.5%, which is marginally lower than the National Statistical Office's (NSO) Second Advance Estimate (SAE) of 7.6% for the fiscal. According to the agency's assessment, this more conservative estimate reflects the impact of global economic uncertainties and regional geopolitical tensions on India's economic performance. The agency expects GDP growth to moderate to 7% in the January-March quarter of FY26, lower than the National Statistical Office's implicit estimate of 7.3% and down from 7.8% in the third quarter of 2025-26. As per ICRA, services, mining and electricity indicators improved in Q4 FY26, but industrial growth was affected by slower manufacturing output, weak exports and margin pressures linked to the West Asia crisis.
The rating agency expects GDP growth in the fourth quarter to ease to a three-quarter low of 7% from 7.8% in the third quarter of 2025-26. As reported by ICRA, the early impact of the West Asia crisis is likely to pull down India's GDP growth to 7.0% in Q4 FY2026, below the National Statistical Office's implicit estimate of 7.3% for the quarter. According to ICRA Chief Economist Aditi Nayar, "Consequently, we expect the GDP growth to have slowed to a three-quarter low of 7 per cent in Q4 2025-26, below the NSO's implicit estimate of 7.3% for the quarter, while remaining quite robust." A slower expansion across the industrial and services sectors is expected to have moderated GDP growth between these quarters, even as the performance of the agriculture sector is likely to have improved slightly. As per ICRA, "a slower rise in manufacturing volumes, contraction in exports, and nascent signs of margin pressure amid the West Asia fallout may have weighed on the industrial gross value added (GVA) growth performance in the quarter."
According to ICRA, agriculture, forestry and fishing GVA growth is projected to rise to around 2.1% in Q4 FY26 from 1.4% in the previous quarter, aided by higher rabi output of rice, wheat and coarse cereals despite erratic weather. However, industrial GVA growth is expected to slow to 7.3% from 9.7% in Q3 FY26, with manufacturing GVA growth likely to decelerate sharply to 8-9% from 13.3%. As per ICRA, manufacturing output growth slowed to 5.1% in Q4 FY26 from 6.3% in the previous quarter, while corporate earnings reflected weaker operating profit growth amid rising raw material costs. The services sector growth is projected to ease to 8.5% in Q4 FY26 from 9.5% in the preceding quarter, with slower expansion in financial, real estate and trade-related services. Within the financial sector, growth in outstanding deposits and non-food bank credit improved by end-March 2026, though banks came under profitability pressure due to mark-to-market losses after bond yields rose sharply, with the 10-year government security yield climbing to 7.04% from 6.59% at end-December 2025.
Slowing global growth and shipping disruptions triggered by the West Asia conflict weighed on India's merchandise exports in the March quarter of 2025-26, which fell by 2.8% on a year-on-year basis, after a modest 1.4% rise in the December quarter. According to ICRA, this decline reflects the broader impact of geopolitical tensions on India's export-oriented sectors and highlights the challenges facing the country's external trade performance in the current fiscal year. Exports of textiles, pharmaceuticals and gems and jewellery were among the worst affected. The agency noted that the outlook remains vulnerable to geopolitical developments and commodity price movements, especially crude oil, which could affect inflation, corporate profitability and overall economic momentum. The Indian Rupee hit a historic low, closing at 96.53 against the US dollar, adding to the economic pressures from elevated oil prices.
