New Delhi: India’s real gross domestic product (GDP) is projected to grow 6.4 percent in fiscal year 2026–27, making it the fastest-growing economy among G20 nations, according to a new report by Moody’s Ratings.
The report highlighted that India’s economic expansion will be supported by strong domestic consumption, favourable policy measures, and stable macroeconomic conditions. Moody’s also said the outlook for the country’s banking system remains broadly positive, with banks having sufficient capital buffers to absorb potential loan losses.
Banking Sector Outlook Remains Strong
Moody’s expects the operating environment for Indian banks to remain robust in 2026, driven by structural reforms and solid macroeconomic fundamentals. The agency noted that recent policy steps, including the rationalisation of the Goods and Services Tax (GST) in September 2025 and an earlier increase in personal income tax thresholds, are likely to improve consumer affordability and boost spending.
These measures are expected to support consumption-led economic growth, which remains a key pillar of India’s expansion story.
RBI Policy and Inflation Outlook
The report said the Reserve Bank of India (RBI) is likely to ease monetary policy in FY27 only if there are clear signs of an economic slowdown. If inflation remains under control, the central bank will have greater flexibility to adjust policy rates.
In its first monetary policy review of 2026, the RBI’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.25 percent, reflecting confidence in current growth and inflation trends. Analysts believe the central bank may maintain a prolonged policy pause due to positive economic momentum and improved global trade prospects.
Loan Growth and Corporate Health
Moody’s forecasts system-wide loan growth of 11.13 percent in FY27, up from 10.6 percent in FY26 (year-to-date). Corporate loan quality is expected to remain healthy, supported by stronger balance sheets and improved profitability among large companies.
However, the report noted that recoveries from stressed loans may taper, as banks have already resolved most large corporate bad loans in recent years.
Growth Outlook Compared to Government Estimates
Moody’s FY27 growth projection is slightly lower than the 6.8–7.2 percent growth range forecast in the Finance Ministry’s Economic Survey. Official estimates suggest India’s economy could grow 7.4 percent in the current fiscal year.
The ratings agency has previously stated that lower effective GST rates could further boost private consumption, strengthening India’s growth trajectory.
Analysts See Extended Rate Pause
Market analysts said the RBI’s decision to keep rates unchanged indicates a favourable assessment of growth and inflation dynamics. They expect the central bank to maintain an extended policy pause, supported by a cyclical economic upswing and confidence from recent trade agreements.