India's real GDP growth is projected to ease to 6.6% in the fiscal year ending March 2027, down from 7.7% recorded in FY26, according to S&P Global Ratings. The ratings agency cited a combination of energy stress, expectations of a sub-par monsoon and weaker global growth as key factors weighing on economic activity during the current fiscal year. Growth momentum faces multiple headwinds as the Indian economy expanded by 7.7% in FY26 after recording 7.1% growth in FY25. The forecast aligns with the Reserve Bank of India's latest growth estimate and comes amid mounting uncertainty linked to the West Asia conflict and weather-related risks. S&P expects India's growth to improve to 7.2% in the next financial year and to 7% in the subsequent year, indicating a gradual recovery trajectory.
A key concern highlighted by S&P is the sharp increase in energy-related costs stemming from tensions in West Asia. India imports around 88% of its crude oil requirements, making the economy particularly vulnerable to spikes in global oil prices. Higher crude prices not only raise the country's import bill but also feed into inflation and increase production costs across industries. The impact of the ongoing energy stress is already visible, with industries facing higher input costs and longer supplier delivery times. S&P also noted that higher fertiliser prices are emerging as an additional concern, as they could increase farming costs, affect agricultural output and eventually push up food prices. While the announcement of an interim peace deal between the US and Iran last week has softened crude oil prices, the energy stress is expected to weigh on the economy until damaged energy infrastructure in West Asia returns to normalcy.
The India Meteorological Department (IMD) has forecast a below-normal monsoon for 2026, projecting rainfall at 90% of the long-period average (LPA) due to El Niño conditions. The forecast includes a 60% probability of deficient rainfall and a further 24% probability of below-normal rainfall. To mitigate the risks arising from deficient rainfall, the government has prepared state-wise contingency plans that recommend alternative crops suited to lower rainfall conditions. However, a prolonged shortfall in rainfall could still weigh on rural demand and agricultural output, adding another layer of uncertainty to the growth outlook.
S&P expects inflationary pressures to intensify in the coming months as higher energy costs gradually filter through the economy. The agency estimates that consumer inflation in India could be 0.5 to 0.6 percentage points higher in the third quarter as manufacturers pass on rising costs to consumers. Recent increases in petrol, diesel and cooking gas prices are also expected to contribute to price pressures. According to S&P, consumer inflation is likely to rise to 5.1% during the current fiscal year, compared to India's retail inflation averaging around 2% in FY26. The expected rise in inflation could prompt the RBI to tighten monetary policy, with S&P expecting the central bank to raise the policy repo rate by 25 basis points in the second half of the current fiscal year. The agency has projected the repo rate to remain at 5.50% during the next two financial years and ease to 5.25% only in FY30.
Measures undertaken by the Indian government and the RBI to attract foreign capital inflows have helped the rupee strengthen somewhat against the US dollar, according to S&P Global. The agency has projected the exchange rate at ₹93.5 per dollar in FY27, better than Wednesday's closing level of ₹94.65 per dollar. This improvement in currency stability provides some support to the overall economic outlook amid the challenging growth environment.
India's registered investor base has reached 13.1 crore as of May 2026, with the last crore of additions taking approximately seven months, according to NSE data. The overall base grew at a 25.3 per cent CAGR during FY21-FY26 compared with 16.3 per cent CAGR during FY16-FY21. Regionally, North India now accounts for the largest share at 36.7 per cent, having surpassed Western India in 2022. States outside the top 10 now account for 27 per cent versus approximately 22 per cent in FY17, indicating a gradual broadening of the investor base beyond traditional large states. The investor base is also trending younger, with the share of registered investors below 30 years increasing from 23.5 per cent in March 2020 to 38.3 per cent in May 2026, while the median age fell from 38 years to 33 years. Young investors continue to dominate new registrations, with those below 30 accounting for 53-59 per cent of incremental additions.
