Moody’s Projects India’s GDP To Grow 6.4% In FY 27

Mumbai: Global rating agency, Moody’s Ratings on Monday projected India’s GDP to grow at 6.4 per cent in fiscal year 2026-27, the fastest pace among G-20 economies, supported by strong domestic consumption, policy measures, and a stable banking system. Moody’s said that Indian banks’ asset quality will remain resilient, although some stress may persist among micro, small, and medium enterprises (MSMEs) and on deposit mobilisation.“We forecast India’s real GDP will grow 6.4 per cent for fiscal 2027, the fastest pace among G-20 economies, driven by strong domestic consumption and policy measures. The GST rate cuts in September 2025 and an earlier increase in personal income tax thresholds will support consumption-led growth,” Moody’s said in its banking system outlook report.Moody’s FY27 growth projection is lower than the 6.8–7.2 per cent range estimated by the Finance Ministry in the Economic Survey tabled in Parliament last month.The rating agency said that domestic banks have sufficient reserves to absorb potential loan losses. It said that the operating environment for banks will remain strong in 2026, backed by robust macroeconomic conditions and ongoing structural reforms. The agency said that banks’ capital will remain strong, with internal capital generation sufficient to cover expected loan growth of 11-13 per cent. Capital ratios are already far exceeding regulatory requirements. Profitability will be stable, with the systemwide return on assets (ROA) expected at 1.2-1.3 per cent. Net interest margins (NIMs) will improve gradually as deposit costs decline. Moody’s expects loans to grow in line with deposits, keeping the systemwide loan-to-deposit ratio around 80 per cent.While the overall picture is stable, there are specific areas to watch. “The quality of retail loans will be stable, particularly in the prime borrower segment, although it will diverge to some extent among lenders based on underwriting standards and target borrower groups. “Banks will face difficulty with deposit mobilization amid heightened competition, particularly for low-cost current and savings accounts.



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