Credit ratings agency Moody’s on Friday raised India’s real GDP growth forecast to 7% from 6% for the current fiscal year, citing the country’s resilience amid the Middle East conflict.
According to Fortune, “The ratings agency, however, retainedand stable outlook, noting that the country’s high general government debt, weak debt affordability, and low per capita income continue to constrain its credit profile.”
“Although we continue to expect India to grow faster than all other , as well as similarly rated emerging market sovereigns, risks remain,” Moody’s report stated, as per Reuters.
The agency said elevated energy prices and El Niño-related food price pressures pose risks to inflation, consumption and growth.
Middle East shock
Moody’s said India’s fiscal policy response to the had been muted, but warned that higher global energy prices could increase subsidy spending and pressure the government to provide additional support, while rising defence and infrastructure spending could constrain fiscal consolidation.
India’s economy grew 7.8% in the April-June quarter, government data showed last month, comfortably beating expectations as a surge in investment and manufacturing activity offset weakness in mining and consumer-facing services.
A report released by S&P Global on August 27, 2026, stated that high energy prices and challenging agricultural conditions will marginally slow India’s growth this year, “but we expect economic fundamentals to remain sound and support robust growth over the next two to three years.”
“We affirmed our ‘BBB’ long-term and ‘A-2’ short-term sovereign credit ratings on India,” the stated.
It claimed India’s rural economy will be affected by lower rainfall from El Nino and volatile input costs driven by the Middle East war.
“The agriculture sector accounts for about 18% of the Indian economy and employs 43% of the workforce. But economic diversification in recent years toward services such as finance and technology, infrastructure investment, and manufacturing, will act as stabilizers to cushion the effect of weak monsoons,” it added.