Moody's Ratings has raised India's GDP growth forecast for the current financial year to 7% from 6.5%, citing stronger economic activity and the economy's better-than-expected resilience to the energy price shock.

In its Global Macro Outlook 2027-28 report released today, the rating agency said robust consumption, improving investment prospects and strong macroeconomic fundamentals could help India sustain growth near 7% over the medium term.

The revised growth forecast for FY27 is slightly below the Reserve Bank of India's projection of 7.1%, announced in its October monetary policy review.

Moody's also projected India's GDP growth at 7% in FY28 and FY29, suggesting that the economy could maintain its current momentum despite elevated energy prices and tighter monetary conditions.

The rating agency said India had absorbed the energy price shock better than previously anticipated, supported by diversification of crude oil and natural gas supplies. Government-backed oil marketing companies and tax reductions also helped shield consumers from the immediate impact of higher energy prices.

India's large refining capacity, including the world's largest single-site refining complex, helped contain disruptions to domestic fuel supplies while supporting exports of refined petroleum products, Moody's said.

The agency also pointed to signs of a recovery in private capital expenditure after several years of balance sheet repair by companies and banks.

Strong capital goods production and imports, accelerating industrial credit growth and rising capacity utilisation suggested that India was approaching a new private investment cycle.

A sustained increase in private investment, particularly in manufacturing, could lift employment and productivity, potentially pushing economic growth above Moody's baseline forecast.

Broader economic activity also remained firm, supported by expansion in manufacturing and services purchasing managers' indexes, alongside double-digit year-on-year growth in goods and services tax collections, vehicle sales and merchandise exports.

However, Moody's cautioned that inflation, a deficient southwest monsoon and further interest rate hikes could pose risks to the growth outlook.

With headline inflation approaching the upper end of the Reserve Bank of India's 2–6% tolerance band, rising prices could weigh on household consumption. October retail inflation data, scheduled to be released on Thursday, is widely expected to top 6%.

The agency also warned that a weak monsoon and strengthening El Niño conditions could affect agricultural production and rural demand.