India’s economic growth is expected to moderate but remain resilient in the next financial year as domestic consumption and investment cushion global risks, according to a report by Crisil.
India’s real gross domestic product growth is projected at 7.1 per cent in fiscal 2027, down from a revised 7.6 per cent in fiscal 2026 under the new GDP series, the ratings and analytics firm said in its latest outlook report released on Wednesday.
The forecast assumes a normal monsoon this year, relatively stable food inflation, crude oil prices around USD 75–80 per barrel, and steady global growth despite geopolitical tensions and rising protectionism.
According to the report, strong domestic demand will remain the main driver of the economy even as global uncertainties persist. Household consumption — which accounts for around 57 per cent of GDP — is expected to continue supporting growth, though the pace may slow as the impact of temporary tax benefits fades.
Fiscal measures such as income tax cuts, rationalisation of goods and services tax rates, increased direct benefit transfers and adequate liquidity have supported consumption by improving disposable income and lowering borrowing costs, the report said.
“India has grown steadily in an environment buffeted by exogenous uncertainties. Our fiscal 2027 forecast reflects its strong domestic counterweights, especially consumption, infrastructure capex, uptick in the private investment cycle led by emerging sectors and gradually improving trade competitiveness,” said Amish Mehta, managing director and chief executive officer at Crisil.
However, the report cautioned that geopolitical conflicts, rising public debt, technological disruptions and climate-related risks will need close monitoring as they could affect growth prospects.
Inflation measured by the consumer price index is expected to rise to about 4.3 per cent in fiscal 2027 as food prices normalise from a low statistical base, although the impact on headline inflation may remain contained due to a lower weight for food under the revised index base year of 2024.
Discretionary consumption sectors such as automobiles, consumer durables, airlines and hotels are expected to outperform due to improved affordability and pent-up demand. Structural factors, including smaller households, rising female workforce participation and increasing incomes, are also likely to sustain aspirational consumption trends.
“Domestic demand is expected to stay supportive in fiscal 2027, with fiscal measures lifting disposable incomes and private investment seeing a mild pick-up. That said, risks remain tilted to the downside, given renewed geopolitical flare-ups and lingering trade-related uncertainty that can transmit through commodity prices, trade and capital flows,” said Dharmakirti Joshi, chief economist at Crisil.
Corporate revenue growth is expected to remain in the range of 8–9 per cent, backed by consumption and a gradual recovery in private investment. However, commodity-linked sectors could face pricing pressure while construction-related segments may see slower growth.
Operating profitability may also come under pressure, with earnings before interest, tax, depreciation and amortisation margins expected to decline by 40–60 basis points due to temporary supply disruptions and subdued price realisations, the report said.
Higher energy prices could add further pressure on sectors such as airlines, chemicals, fertilisers, paints, petrochemicals and tyres.
Meanwhile, industrial capital expenditure is expected to strengthen as the investment cycle broadens beyond public infrastructure to manufacturing and emerging sectors. Crisil estimates annual industrial capex could reach around Rs 9.1 lakh crore between fiscals 2027 and 2031 — roughly 1.5 times higher than the previous period.
Investment growth is expected to be driven by policy-backed sectors, including electronics, semiconductors, electric vehicles, solar photovoltaic manufacturing, defence production and artificial intelligence-related infrastructure.
“Industrial capex could strengthen as the investment cycle broadens beyond public infrastructure into manufacturing and new-age sectors,” said Priti Arora, president and business head at Crisil Intelligence.
The report also said India’s export competitiveness is improving due to better infrastructure, technology adoption, skills development and government initiatives aimed at localisation and integration into global value chains.
Exports are expected to double to around Rs 80 lakh crore by fiscal 2031, although Crisil noted that global trade uncertainties and geopolitical tensions could still pose risks through commodity prices, trade flows and capital movements. |
