India’s GDP is expected to expand by 6.6 per cent in the current fiscal year compared to 7.7 per cent in FY26, citing sluggish investment and consumer growth as well as trade disruptions from the West Asia crisis, as per BMI report, a Fitch group company.
The Indian rupee’s decline from its average level of 87 in 2025 will boost export competitiveness and counteract the negative impact on GDP from the terms-of-trade shock induced by the Iran conflict, said the report, which predicted that the rupee would trade in the range of 95.1 against the US dollar this year.
“Looking ahead, we continue to expect 6.6 per cent GDP growth in FY2026/27. Our projection represents a visible slowdown from FY2025-26’s 7.7 per cent pace but exceeds India’s average 6.1 per cent per annum growth rate over the last decade,” it stated.
Three variables have been identified by BMI as the reason for this fiscal year’s sluggish growth rate. First, domestic spending is probably going to be less affected by last year’s GST reforms. Second, amid disruption at the Strait of Hormuz, rising price inflation—which BMI projects will reach 5.3 percent in FY27—will impede a surge in demand. Third, BMI expects a slowdown in investment growth throughout the fiscal year.
The report stated, “this slowdown is not due to our new forecast of accumulative 50 basis points (bps) rate hike by the RBI in FY2026/27, since the effect on growth will primarily be felt during FY2027/28.”
Last week, it was reported that India’s economy expanded 7.8 per cent in the January-March quarter, exceeding forecasts on strong domestic demand and government expenditure, before rising oil prices and supply-chain disruptions began clouding the outlook.
The GDP growth compared with 7 per cent expansion a year back and 8 per cent in the previous quarter. Full-year growth accelerated to 7.7 per cent from 7.1 per cent in FY25, supported by healthy consumption and robust investment activity.
