The Indian economy recorded 7.7 per cent growth in the 2025-26 fiscal and 7.1 per cent in 2024-25.
“We project real GDP growth will slow to 6.6 per cent in the fiscal year ending in March 2027, compared with 7.7 per cent in fiscal 2026, amid the energy stress, expectations of a sub-par monsoon, and slowing global growth,” S&P said in its report.
S&P’s FY27 growth projection is in line with the RBI estimate of 6.6 per cent.
The impact of El Nino has weakened monsoon rains, with the rainfall deficit widening to 43 per cent by June 22.
To deal with deficient monsoon, the government has drawn up state-wise contingency plans recommending alternative crops suited to deficient rainfall conditions.
India imports 88 per cent of its crude oil needs, and a rise in global prices increases its import bill and stokes inflation.
In its report titled ‘Economic Outlook Asia-Pacific Q3 2026: AI-Exposed Markets To Outperform’, S&P said the region’s outlook is shaped by resilient global activity, energy market stress, and an AI-driven tech export boom.
S&P said the impact of energy stress arising from the West Asia conflict is visible, as the industry faces a substantial rise in input costs and suppliers’ delivery time. Also, higher fertiliser prices weigh on food production and raise food prices.
Rising inflation is eroding purchasing power, thus depressing growth. Sharply higher fertiliser prices may weigh on food production and fuel food prices, S&P said.
S&P said consumer inflation would be 0.5-0.6 percentage points higher in the third quarter in India, and it will rise to 5.1 per cent in the current fiscal year as manufacturers pass on higher energy costs to consumers, alongside recent increases in prices of petrol, diesel, and cooking gas.
“We expect a policy rate hike in the second half of this fiscal year,” S&P said.