India's GDP growth may slow to 6.5% in FY27
What's the story
India's economic growth is expected to slow down to around 6.5% in the fiscal year 2027 (FY27), according to research reports from brokerage firms Dolat Capital and ICICI Global Markets. The forecast comes as a result of rising input costs, geopolitical tensions, and a potentially weak monsoon season. Despite these challenges, private consumption and capital expenditure are likely to keep growth above the 6% mark.
Sectoral concerns
Dolat Capital highlights agriculture and export risks
Dolat Capital warns that if the India Meteorological Department (IMD) prediction of a 90% long-period average (LPA) monsoon under El Nino holds true, agriculture's gross value added (GVA) could slow down to 1.2% year-on-year in FY27. Additionally, softer demand from the Middle East could also impact India's exports. ICICI Global Markets highlights weaker exports and rising input costs as major headwinds for the economy this fiscal year.
Past performance
Strong end to FY26 with GDP growth at 7.8% YoY
India's economy ended FY26 on a strong note with real GDP growth of 7.8% year-on-year in the fourth quarter, beating Dolat Capital's estimate of 6.9% and consensus estimate of 7.3%. For the full fiscal year, GDP grew by 7.7% YoY while GVA grew by an impressive 7.9% YoY, the strongest under the new series. Nominal GDP also witnessed robust growth at 9.1% YoY in Q4 and 8.9% YoY for FY26 as a whole.
Growth drivers
Investment and consumption trends in FY26
Real Private Final Consumption Expenditure (PFCE) accelerated to 7.7% YoY in FY26 from 5.8% YoY in FY25, driven by GST rationalization, income tax cuts, easing inflation, and stronger rural demand. Gross Fixed Capital Formation (GFCF) also rose sharply at 8.2% YoY against last year's 6.4%. The fourth quarter saw robust investment growth at 10.8% YoY, while private and rural consumption remained resilient despite global challenges such as the West Asian conflict impacting crude imports and costs for businesses.