Global rating agency Moody’s Ratings has projected India’s GDP to grow 6.4% in FY27, positioning the country as the fastest growing major economy among the G20 nations. The outlook is underpinned by strong domestic consumption, supportive policy measures, and a resilient banking system.
The projection was outlined in Moody’s latest banking system outlook report, which highlighted India’s macroeconomic stability despite pockets of stress in specific borrower segments.
Consumption and Policy Reforms to Drive Growth
According to Moody’s, India’s growth momentum will be sustained by robust household consumption and recent policy interventions aimed at improving affordability. The agency pointed to the rationalisation of the goods and services tax (GST) in September 2025 and the earlier increase in personal income tax thresholds as key drivers supporting consumer demand.
Moody’s FY27 forecast is slightly lower than the 6.8–7.2% growth range projected by the Finance Ministry’s Economic Survey tabled in Parliament last month. Official estimates indicate that India is likely to grow at 7.4% in FY26, higher than the 6.5% expansion recorded in FY25.
Banking System Outlook Remains Stable
Moody’s expects India’s banking operating environment to remain strong through 2026, supported by favourable macroeconomic conditions and ongoing structural reforms. Asset quality is projected to remain broadly resilient, though the agency flagged some stress among micro, small and medium enterprises (MSMEs).
However, it noted that banks have adequate capital buffers and provisions to absorb potential loan losses. Corporate loan quality is expected to stay healthy, aided by strong balance sheets and improved profitability among large companies.
Credit Growth and Capital Adequacy
The rating agency forecast system wide loan growth of 11–13% in FY27, marginally higher than the 10.6% growth recorded in FY26 year-to-date. Recoveries from stressed corporate assets are likely to moderate, as banks have already resolved a significant portion of legacy large corporate exposures.
Moody’s added that banks will maintain strong capitalisation, supported by internal capital generation keeping pace with asset growth. Funding and liquidity conditions are expected to remain stable, with loan growth broadly aligned with deposit mobilisation.
RBI Policy Easing to Be Data-Dependent
With inflation under control and growth momentum intact, Moody’s said further monetary easing by the Reserve Bank of India in FY27 would depend on signs of an economic slowdown.
The RBI has already cut policy rates by a cumulative 125 basis points to 5.25% in 2025. Moody’s reiterated its expectation of continued government support for banks if required, reinforcing confidence in the stability of India’s financial system.
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