Kamal Ghorui
Moody’s Ratings has lowered India’s FY27 growth forecast to 6%, down from an earlier estimate of 6.8%, citing weaker consumer demand and slower industrial performance amid rising energy and input costs linked to the West Asia conflict.For FY26, the agency expects India’s GDP growth to be 7.6%, according to official estimates, as reported by ET.The report said higher energy prices are likely to increase import bills, weigh on economic expansion and raise pressure on government finances due to higher fuel and fertiliser subsidy spending. It also highlighted that the West Asia situation is adding strain on production networks and supply chains.“The country’s high dependence on Middle Eastern oil and gas imports raises near-term supply-disruption risks, although strategic petroleum reserves and commercial inventories will mitigate economic disruption over the next few months,” the report said, as cited by ET.Moody’s also flagged concerns over India’s reliance on the region for nitrogen-based fertilisers such as urea and ammonia, noting that any disruption in supply could drive up prices and pose risks to agricultural output and food security.The agency said persistent high energy costs could widen the trade deficit, slow growth and add to fiscal stress. It added that inflationary pressures and external account balances could also deteriorate if the situation continues.Oil marketing companies and energy-intensive sectors such as cement, chemicals and aviation are expected to face margin pressure due to limited ability to pass on higher input costs. In contrast, infrastructure and utility firms are seen as more stable, supported by regulated returns, access to domestic fuel sources and policy backing.Moody’s noted that continued infrastructure spending by the government and gradual easing of trade barriers will help support investment activity. It also said strong foreign exchange reserves and services exports will provide a buffer against external shocks.On external risks, the agency warned that prolonged instability in Gulf Cooperation Council countries could weaken remittance inflows. Combined with a larger trade deficit, this may put pressure on India’s current account and the rupee, potentially requiring central bank intervention. The Middle East accounts for more than one-third of India’s remittance inflows.Despite these challenges, Moody’s said India’s external position remains broadly steady, supported by robust foreign exchange reserves, low external debt and limited reliance on external financing.
