Fitch raises India FY27 GDP forecast to 6.9%; RBI rate hike to 5.5% expected in October

India’s economic growth outlook has received an upward revision from Fitch Ratings, with the agency raising its FY2026-27 GDP growth forecast to 6.9% from 6.4%. The upgrade follows stronger-than-expected growth in the June quarter, although Fitch expects economic momentum to slow through the rest of the financial year.

Fitch also expects the Reserve Bank of India (RBI) to raise its policy rate by 25 basis points to 5.5% at its October monetary policy meeting, citing strong demand, rising prices and supply-side pressures.

Why Fitch raised India's GDP growth forecast

The Indian economy grew 7.8% in the June quarter, a performance Fitch said showed resilience despite the impact of the US-Iran war and a sharp deterioration in terms of trade during the first half of 2026.

Based on the stronger June-quarter performance, Fitch revised its full-year growth projection upward from the 6.4% forecast it gave in June to 6.9%.

The revision puts Fitch’s latest outlook closer to other major global ratings agencies. S&P Global Ratings has projected India's FY27 growth at 7%, while Moody’s Ratings also expects 7% growth.

India had recorded 7.8% GDP growth in FY2025-26, according to the figures cited by Fitch.

RBI rate hike expected in October

Despite the stronger growth outlook, Fitch expects the RBI to tighten monetary policy later this year.

The agency expects a 25-basis-point rate increase in October, taking the policy rate to 5.5%. Fitch then expects another increase to 5.75% in early 2027, followed by a reduction back to 5.5% in 2028.

Fitch’s expectation comes as strong demand and rising prices create pressure on the central bank, while supply-side developments add to the inflation outlook.

Growth could slow in the second half of FY27

Fitch expects India’s economic momentum to ease over the remainder of the financial year.

Its assessment points to slower expansion in both manufacturing and services, based on purchasing managers’ index (PMI) surveys. Below-normal monsoon rainfall is also expected to affect agriculture and rural demand.

At the same time, rising inflation could put pressure on household purchasing power and consumer spending.

The agency said these factors are likely to moderate growth even as the overall Indian economy remains resilient.

Private investment remains a bright spot

Fitch sees stronger prospects for private investment, with investment expected to grow by more than 10%.

It also pointed to non-food credit growth of 19% year-on-year in July as another indicator of investment momentum.

The combination of robust investment activity and the strong June-quarter performance has helped support Fitch’s higher full-year GDP forecast, even as the agency expects some cooling in economic activity ahead.

With PTI inputs