Why Global Credit Agencies Are Suddenly Raising India's GDP Growth Outlook

India has been dealing with geopolitical tensions, higher energy prices and pressure on trade. Yet growth has not collapsed.

23 Sep 2026, 07:26 · NDTV

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India's FY27 GDP growth forecast raised by S&P to 7 per cent from 6.6 per cent
June quarter growth hit 7.8 per cent, driven by industry, consumption, and exports
Domestic consumption remains strong, cushioning India from global trade shocks

Can India sustain this growth momentum if global trade tensions worsen?

India's growth story has picked up pace even as concerns around the global economy have intensified.

S&P Global Ratings has raised its India GDP growth forecast for FY27 to 7 per cent from 6.6 per cent. Fitch Ratings has also upgraded its projection, taking it to 6.9 per cent from 6.4 per cent.

Moody's had already raised its FY27 forecast to 7 per cent last week.

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And then there is JPMorgan Chase CEO Jamie Dimon, who called India one of the world's fastest-growing economies and said its prospects were "pretty bright".

So, why are global institutions suddenly more confident about India?

"The answer lies in a combination of stronger-than-expected domestic growth, resilient consumption, investment and India's ability to absorb external shocks," Dr Abhinav P Tripathi, a senior economist, told NDTV.

1. India Just Delivered A Bigger-Than-Expected Growth Number

The immediate trigger for the upgrades is India's June quarter GDP data. The economy grew 7.8 per cent year-on-year in the April-June quarter of FY27. That was stronger than many economists and global institutions had expected. S&P said the June quarter growth was supported by robust industrial activity, healthy consumption, strong goods exports and accelerating government investment. The agency consequently raised its full-year FY27 growth forecast to 7 per cent from 6.6 per cent.

Fitch also pointed to the stronger-than-expected June quarter performance when raising its forecast to 6.9 per cent. The ratings agency said India's economy had remained resilient despite the shock from the US-Iran conflict and a deterioration in its terms of trade during the first half of 2026.

2. Consumers Are Still Spending

One of the biggest reasons behind the optimism is domestic consumption. India is less dependent on exports for growth than many major Asian manufacturing economies. That gives the economy an important cushion when global trade and geopolitical conditions become uncertain.

S&P specifically highlighted strong consumption growth as one of the factors behind its upgrade. It also said India's investment momentum remained among the strongest in the Asia-Pacific region. That matters because sustained consumption creates demand for everything from cars and housing to financial services, travel and consumer goods.

Recent analysis from Nomura also pointed to strong domestic demand, particularly consumption, as an important anchor for India's growth. It said relatively limited pass-through of higher global energy prices to retail fuel prices and still-benign underlying inflation had helped protect household purchasing power.

3. Investment Is Becoming A Bigger Growth Engine

The second major pillar is investment. Government capital expenditure has remained an important support for economic activity. S&P cited accelerating government investment as one of the reasons growth exceeded its expectations in the June quarter. Fitch is also seeing signs of stronger private investment. It expects investment to rise by more than 10 per cent during FY27. Non-food credit growth had reached 19 per cent year-on-year in July, according to the ratings agency.

4. India Has Absorbed External Shocks Better Than Expected

This is perhaps the most important part of the new optimism. India has been dealing with geopolitical tensions, higher energy prices and pressure on trade. Yet growth has not collapsed.

Fitch specifically said the 7.8 per cent June quarter growth showed the economy's resilience in the face of the US-Iran war shock. Moody's has made a similar argument. It raised India's FY27 growth forecast to 7 per cent from 6 per cent, citing the economy's resilience amid the Iran conflict. However, it also warned that higher energy prices and El Nino-related food inflation remain risks.

5. Goods Exports Are Adding To The Growth Mix

S&P also pointed to stronger goods exports as a factor behind the June quarter performance. This is significant because India's growth story is increasingly being supported by multiple engines rather than one single source. Consumption is supporting demand. Government spending is supporting investment. Private investment is showing signs of strengthening. And exports are providing an additional source of activity.

The Bullish Forecasts Still Come With Warnings

The upgraded forecasts should not be read as a clean bill of health.

S&P expects inflation to average 5.1 per cent in FY27 and sees the RBI raising its policy rate by 25 basis points. Higher oil prices could put additional pressure on inflation and the rupee. Fitch also expects the RBI to raise rates by 25 basis points in October, citing strong demand, price pressures and adverse supply developments.

"In other words, the ratings agencies are more optimistic about the starting point for FY27. They are not saying the year will be completely smooth," added Dr Tripathi.

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