India's GDP Growth To Ease To 6.6% In FY27 Amid Consumption & Investment Slowdown: BMI

New Delhi, Jun 11 (KNN) India's GDP growth is expected to moderate to 6.6 per cent in FY2026–27 from 7.7 per cent in the previous fiscal year, weighed down by weakening investment and consumption growth and the economic fallout from the West Asia crisis, according to BMI, a Fitch Group company.

The projection aligns with the Reserve Bank of India's (RBI) own estimate of 6.6 per cent growth for FY27.

“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," BMI said, as cited by PTI.

Government data released last week confirmed that GDP growth in FY26 accelerated to 7.7 per cent from 7.1 per cent in FY25, supported by robust consumption and investment activity.

Three Factors Behind the Slowdown

BMI attributed the deceleration to three interconnected factors.

First, the consumption tailwind from GST reforms implemented in September 2025 is expected to fade. Those reforms had triggered a consumption surge in the December 2025 quarter, but consumption growth subsequently fell by 1.1 percentage points to 7.1 per cent year-on-year in the March 2026 quarter.

Second, higher price inflation — which BMI projects at 5.3 per cent in FY27 — will constrain household spending, compounded by supply disruptions at the Strait of Hormuz stemming from the ongoing Iran conflict.

Third, investment growth is expected to slow during the year. 

BMI clarified, however, that this is not primarily a consequence of its forecast of a cumulative 50 basis points rate hike by the RBI in FY27, as the full impact of tighter monetary policy on growth would be felt in FY2027–28 rather than the current year. 

The relatively low level of short-term interest rates — following the RBI's 125 basis points in rate cuts during 2025 — is expected to continue providing support to the economy through the ongoing energy crisis.

Rupee Depreciation to Support Exports

BMI expects the rupee to average 95.1 against the US dollar in the current calendar year, a significant depreciation from its average of 87 in 2025. 

The research firm said the weaker currency would support India's export competitiveness, partially offsetting the terms-of-trade shock arising from the Iran conflict's impact on energy prices and trade routes.

(KNN Bureau)