Moody’s projects India’s GDP to grow 6.4% in FY’27, fastest among G20 economies

In its banking system outlook report, Moody’s said their asset quality will remain resilient, with some stress among micro, small and medium enterprises (MSMEs). Regardless, banks have sufficient reserves to absorb loan losses, it said.

The operating environment for banks will remain strong in 2026, supported by robust macroeconomic conditions and structural reforms, it said.

“We forecast India’s real GDP will grow 6.4% for fiscal 2026-27, the fastest pace among G-20 economies, driven by strong domestic consumption and policy measures.

“The rationalization of the goods and services tax (GST) in September 2025 and an earlier increase in personal income tax thresholds will help improve affordability for consumers and support consumption-led growth,” Moody’s said.

The FY’27 GDP growth estimates by Moody’s are lower than the 6.8-7.2% range projected by the Finance Ministry’s Economic Survey tabled in Parliament last month.

As per official estimates, India is likely to grow at a faster pace of 7.4% in the current fiscal (2025-26), higher than 6.5 per cent growth clocked in 2024-25.

Moody’s said with inflation under control and growth momentum remaining strong, Moody’s anticipates RBI will further ease monetary policy in fiscal 2026-27 only if there are signs of a slowdown in economic activity.

The Reserve Bank of India (RBI) has lowered its policy rate by a total of 125 basis points to 5.25% in 2025.

Moody’s expects system-wide loan growth to accelerate slightly to 11–13% in fiscal 2026–27, from 10.6% in fiscal 2025-26 YTD.

“Corporate loan quality will remain healthy, supported by strong balance sheets and improved profitability among large companies. Recoveries will taper as banks have resolved stressed loans to large corporate,” Moody’s said.

It further said that banks will maintain strong capitalization, supported by internal capital generation that keeps pace with asset growth. Banks’ funding and liquidity will be stable, with loans growing in line with deposits.

“We continue to expect the government to provide strong support for banks in times of need,” Moody’s added.