India's GDP to grow at 6% in 2026, says Moody's
What's the story
Moody's Ratings has revised India's GDP growth forecast for 2026 downward by 0.8% to 6%. The revision comes on the back of weak private consumption, capital formation, and industrial activity amid rising energy costs. In its Global Macro Outlook May report, Moody's noted that the impact of higher energy prices and shortages will differ across countries in the next six months based on their exposure and resilience.
Continued challenges
Outlook for 2027 also lowered
The credit rating agency has also lowered India's GDP growth outlook for 2027 to 6%. This is due to persistent global and domestic pressures. These headwinds are expected to gradually fade as shipping flows stabilize and energy supplies improve, allowing underlying economic activity to recover. India is especially vulnerable to high oil prices because it imports around 90% of its energy needs, making it susceptible to fluctuations in global markets.
Economic impact
Global tensions, energy costs could impact economic recovery
Moody's has warned that persistently high energy costs will keep inflation elevated, compress the profits, weaken investment and strain public finances. Major central banks are currently on hold but could tighten financial conditions if necessary. The agency also highlighted the uncertainty in the global outlook due to ongoing tensions between the United States and Iran. These tensions could lead to another potential energy and food-price shock if transit flows remain constrained.
Energy dependency
India diversifies oil import sources
India's dependence on the Strait of Hormuz is significant as it imports 60% of its LPG usage, 90% of which flows through this route. Moody's said several Asian economies are diversifying their supplier mix by increasing oil imports from existing partners and looking for new sources. India is now importing more Russian crude, while Japan and South Korea are gradually moving toward US barrels, according to the agency.