India's economic growth to slow to 6.8% FY27 amid West Asia crisis, El Nino impact

India Ratings & Research on Tuesday (August 18, 2026) projected India’s GDP growth to slow down to 6.8% in the current fiscal year. It expects the rupee-dollar exchange rate to average ₹93.98 (May 2026: ₹94.28), a depreciation of 6.4% YoY, in FY27.

Fitch Group subsidiary Ind-Ra estimates capital flows of $70 billion under foreign currency non-resident (bank) (FCNR B) and external commercial borrowings (ECBs).

The slowdown in GDP growth in FY27 vis-a-vis FY26 is attributed to higher fuel and food inflation stemming from the West Asia conflict’s uncertainty, fragile currency, and the likely impact of El Niño on agriculture, Ind-Ra remarked in an official note.

The agency has forecast quarterly GDP growth at 6.9, 6.6, 6.7, and 6.9% for April-June, July-September, October-December, and January-March as against the RBI’s prediction of 7, 6.4, 6.5, and 6.8, respectively.

Ind-Ra Chief Economist and Head — Public Finance Devendra Pant noted the crude oil price of the Indian basket averaged $101.31 per barrel in the June quarter of FY27 and $96.49 per barrel for April-July 2026.

“Our crude oil rate assumption for FY27 is USD85/bbl. Lower oil prices positively impact the Indian economy by reducing the trade/current account deficit (CAD). However, higher inflation due to El Niño may limit expansion upside from lower oil prices,” Mr. Pant said.

Ind-Ra estimates retail inflation to average 4.9% in the current fiscal year, compared to 2% in FY26. The current account deficit is estimated to rise to 1.5% of GDP, from 0.6% in FY26.

The FY27 deficit target of 4.3% remains challenging due to subsidies on liquefied petroleum gas and fertilisers. While direct tax collection and non-tax revenue may support achieving the fiscal deficit target, indirect tax collection may pose challenging, Mr. Pant said.