Fitch Group company BMI has projected India’s economic growth to slow to 6.6 per cent in FY27 from 7.7 per cent in FY26, as the boost from last year’s GST reforms fades. The firm also expects elevated inflation to weigh on household incomes and private consumption, limiting domestic demand in the coming fiscal.
India is likely to remain the fastest-growing large economy in the Asia-Pacific region, but BMI said risks to its outlook are tilted to the downside. A renewed escalation in the Middle East conflict, higher oil prices and a weaker monsoon could put additional pressure on economic activity and household purchasing power.
BMI expects inflation to average 5.4 per cent in FY27, which could keep pressure on real household incomes. The firm said the combination of fading support from GST reforms and elevated inflation would lead to a moderation in India’s growth momentum after the economy expanded 7.7 per cent in FY26.
The GST reforms introduced in September last year involved tax rate cuts on 375 items and a rationalisation of the earlier four-tier structure into virtually two main slabs of 5 per cent and 18 per cent. BMI expects the initial boost to economic activity from these measures to gradually wear off during FY27.
The moderation comes after strong growth in FY26, when India’s economy expanded 7.7 per cent. As the impact of the GST changes fades, BMI expects inflation to become a more important constraint on consumption, particularly if higher prices continue to erode household purchasing power.
Middle East Conflict Poses Key Risk
BMI identified the US-Iran conflict as a major risk to the Asia-Pacific growth outlook, as any renewed escalation could push crude oil prices higher. Higher energy costs would put pressure on real incomes and private consumption, while also creating broader inflationary pressures across oil-importing economies.
The firm’s forecast assumes that a preliminary deal between the US and Iran will be implemented within the quarter. Any delay or slippage could push oil prices above BMI’s baseline of USD 86 per barrel on average for 2026 and lead to further revisions to its regional growth forecasts.
BMI said it is monitoring tanker traffic through the Strait of Hormuz for signs of a sustained recovery in energy flows. A deal that leaves the strait disrupted could still result in higher oil prices and weaker regional growth, even if broader tensions begin to ease.
For the wider Asia-Pacific region, BMI expects growth to remain steady at 4.1 per cent in 2027, even as India’s growth rate moderates. The outlook will depend partly on developments in the Middle East, energy prices and weather conditions across major Asian economies.
Source from: https://www.businessworld.in/article/india-s-growth-seen-slowing-to-6-6-in-fy27-as-gst-boost-fades-bmi-618911
