Moody's cuts India's FY27 GDP growth estimates to 6 pc amid West Asia conflict

Moodys Ratings has slashed Indias economic growth estimates for the current fiscal to 6 per cent from 68 per cent earlier saying the ongoing conflict in West Asia will moderate growth momentum and raise inflation risksIn its credit opinion report on India Moodys said prolonged disruptions particularly LPG shipments due to the conflict would lead to nearterm household shortages higher fuel and transport costs and spillovers to food inflation through Indias reliance on imported fertilisersThe region accounts for around 55 per cent of crude oil imports and over 90 per cent of liquified petroleum gas LPG supplies to IndiaWhile inflation remains contained for now geopolitical risks have tilted the inflation outlook to the upside Moodys said while projecting inflation to average 48 per cent in FY27 up from 24 per cent in FY26With inflation risks reemerging and growth remaining robust policy rates are likely to be held steady or raised gradually in fiscal 2026acirciquestiquest27 depending on the duration of geopolitical tensions and their passthrough to food and fuel prices Moodys saidIn light of Indias economic exposure to the ongoing military conflict in the Middle East we expect real GDP growth to moderate to 6 per cent in fiscal 202627 from 68 per cent earlier driven by subdued private consumption softer industrial activity and a weakening in the momentum of gross fixed capital formation amid elevated prices and higher input costs according to the Moodys report dated March 31 accessed by PTILast month the Organisation for Economic Cooperation and Development OECD projected Indias GDP growth to moderate to 61 per cent in the current fiscal from 76 per cent growth recorded in 202526Besides an Economy Watch report by EY has said that Indias real GDP growth for FY27 could erode by around 1 percentage point while retail inflation could rise by about 15 percentage points from their baseline estimates if the West Asia conflict persists through 202627Domestic rating agency Icra expects the growth to moderate to 65 per cent in FY27 owing to the adverse impact of elevated energy prices and concerns around energy availability amid the West Asia conflictIt further said the governments sustained emphasis on infrastructure spending and a gradual easing of trade barriers will continue to support investment activityIndias real GDP growth remained robust at 75 per cent in calendar year 2025 up from 72 per cent in CY 2024 and the highest among G20 economies driven primarily by a strong rebound in manufacturingMoodys said elevated oil gas and fertiliser prices would intensify pressures on targeted subsidies resulting in higher outlays alongside revenue erosion compared to the budgetGlobal crude prices have risen by almost 50 per cent since the United States and Israel launched military strikes against Iran on February 28 triggering sweeping retaliation from TehranThe recent cut in excise duty on petrol and diesel will hurt tax receipts Besides persistently high input costs weigh on household consumption and compress corporate profitability softening GST collections and corporate income tax revenuesTaken together we expect higher expenditure commitments and weaker revenue mobilisation to constrain fiscal space and slow the pace of fiscal consolidation in the absence of offsetting revenue measures or expenditure rationalisation it addedMoodys expects gradual debt consolidation consistent with the governments mediumterm objective of reducing central government debt to around 50 per cent of GDP by 203031 from around 57 per cent of GDP in 202425In calendar year 2025 Indias current account deficit marginally narrowed to around 04 per cent of GDP from 09 per cent in the previous year and is expected to remain around 115 per cent of GDP for 2026 and 2027The stable external position is largely attributed to a gradual increase in goods exports offset by high goods imports particularly in imported fuels and raw materialsThe agency expects goods and services exports to remain broadly stable even as goods imports will expand on the back of higher global commodity prices depending on the duration of the ongoing conflict in West Asia widening Indias current account deficitIt also expects India to face higher import costs as it secures alternative and potentially more expensive supplies of fertilisers and gasTrade disruptions affecting West Asia a key market for Indias agricultural exports will also dampen external demand further contributing to a widening of the current account deficitRemittance inflows form another vulnerability as the Gulf region accounts for about 40 per cent of total such flows Moodys saidThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any 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