Moody’s Projects India’s GDP To Grow 6.4% In FY 27

Mumbai: Global rating agency Moody’s Ratings on Monday forecast India’s GDP to grow 6.4 per cent in fiscal 2026-27; This growth will be the fastest among G-20 economies, supported by strong domestic consumption, policy measures and a stable banking system. Moody’s said the asset quality of Indian banks will remain resilient although some stress remains on micro, small and medium enterprises (MSMEs) and deposit mobilization.

“We estimate that India’s real GDP will grow by 6.4 percent for fiscal 2027, the fastest among G-20 economies, driven by strong domestic consumption and policy measures. Reductions in GST rates and an earlier increase in personal income tax thresholds in September 2025 will support consumption-led growth,” Moody’s said in its banking system outlook report.

Moody’s FY27 growth forecast is below the 6.8-7.2 percent range estimated by the Ministry of Finance in the Economic Survey presented in Parliament last month.

The rating agency said domestic banks have sufficient reserves to absorb potential credit losses. It was stated that the operating environment for banks will remain strong in 2026, supported by sound macroeconomic conditions and ongoing structural reforms. The institution said bank capital will remain strong and internal capital generation will be sufficient to meet the expected credit growth of 11-13 percent. Capital ratios are already well above legal requirements. Profitability will be stable, with systemwide return on assets (ROA) expected to be 1.2-1.3 percent. Net interest margins (NIMs) will gradually improve as deposit costs fall. Moody’s expects loans to grow in line with deposits and the systemwide loan-to-deposit ratio to remain around 80 percent.

While the overall picture is stable, there are specific areas to watch. “The quality of retail loans will be stable, particularly in the prime borrower segment, but will vary to some degree across lenders based on underwriting standards and target borrower groups.”

Banks will face challenges in mobilizing deposits, especially in low-cost current and savings accounts, in an increasingly competitive environment.