India increases growth forecast for fiscal year

India's Ministry of Finance has increased its growth forecasts for the current fiscal year. But it also warned about inflation, particularly for fuel and energy, amid continued instability in the Middle East.

India's Ministry of Finance expects India's economy to grow at a pace of 7.3% in the current fiscal year based on its latest assessment of current data, it said in its October economic review. 

The estimate is a slight increase on the previous forecast of 7.1%. 

India's current fiscal year, known as FY27, runs from April 1, 2026 to March 31, 2027.

The report contrasted these figures with global growth predictions of nearer 3%, saying "India's growth momentum, by comparison, has held firm." 

The ministry said growth in various key indicators like energy consumption, port traffic, goods and services tax (GST) collections, and car sales had accelerated in the previous quarter.

Inflation, fueled by El Nino and geopolitics, poses a threat

However, the ministry also warned of continued inflationary pressure and pressure on the rupee currency, as well as downside risks from the El Nino weather phonemenon that could threaten soil moisture ahead of the winter sowing season. 

It said that external factors like oil prices and "global uncertainties" — seemingly a reference at least in part to the instablity in the Middle East — continued to pressure the rupee's value and pose inflationary risks.

Consumer price inflation (CPI), the wholesale price index (WPI), food cost prices and fuel and power prices were all rising month for month, albeit at very different rates.

The CPI was up 5.54% year-on-year in September, but the WPI had risen more sharply at 11.39%. Food index inflation was up by 8% in rural areas, and a slightly more modest 7.18% in urban centers. 

But, as in many other countries, fuel and power costs increases were in an entirely different league, at 25.85% inflation in September 2026 comapred to the same month a year earlier, prior to the outbreak of fighting in the Middle East. 

Ministry says FX reserves ample, rupee's decline appears manageable

Although it has been a comparatively slow decline, the rupee has been consistently losing value against the US dollar over the past five years, threatening the country's relative purchasing power internationally. This slide has picked up pace in the last 15 months or so.

But the ministry pointed to foreign exchange reserves worth some $721 billion and said that India was "well-positioned" to weather such risks and sustain its expansionary trajectory.

Edited by: Roshni Majumdar

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