New Delhi: Robust internal demand, export diversification amid punitive US tariffs, and sustained infrastructure investment will help India retain its fastest-growing major economy tag for the next couple of years.
India’s economy will likely expand at a steady 6.5% pace through 2027, up from a projected 6.4% in calendar year 2026, and 7% in 2025, Moody’s Ratings said in its Global Macro Outlook 2026-27 on Thursday.
The rating agency said government-led capital expenditure and resilient household consumption will continue to power the country’s economy, even as private investment stays cautious.
“We expect Brazil and India — the fastest-growing G-20 economies — will grow at 2.0% and 6.5%, respectively, through 2027, supported by domestic and export diversification. India’s economic growth is supported by robust infrastructure spending and solid consumption, although the private sector remains cautious about business capital spending,” Moody’s said.
Indian exporters, the report underlined, have adapted deftly to shifting trade dynamics amid US tariffs.
“Indian exporters, facing 50% US tariffs on some products, have succeeded in redirecting exports — its overall exports climbed 6.75% in September even as shipments to the US dropped 11.9%,” it said.
“We expect its economy to continue to grow around 6.5% in 2026 and 2027, supported by a neutral-to-easy monetary policy stance amid low inflation. International capital flows because of positive international investor sentiment have buffered external shocks,” it added.
Moody’s assessment comes amid a volatile global backdrop marked by diverging monetary policies, tariff disputes, and a reordering of trade alliances fuelled by US president Donald Trump’s trade war.
The agency expects world GDP growth to hover between 2.5% and 2.6% in 2026 and 2027, slower than the 2.9% pace in 2024, as advanced economies expand modestly while emerging markets remain the stronger growth engine.
The Reserve Bank of India (RBI) expects the country’s economy to expand by 6.8% in FY26. The ministry of finance, on the other hand, has pegged it in a more circumspect 6.3%–6.8% range.
To be sure, the US has imposed tariffs of up to 50%, including 25% as punishment for buying Russian oil, on select Indian goods, including steel, aluminum, and certain manufactured items.
While the new duties have hit Indian exporters in key categories, India has so far avoided escalation, focusing instead on diversifying export markets and pursuing trade talks with the European Union and other partners.
Meanwhile, the RBI is maintaining its repo rate, reflecting a neutral-to-easy stance as inflation stays subdued and growth remains strong, said the Moody’s Ratings report.
India’s retail inflation eased to a record low of 0.25% in October, down sharply from 1.54% in September, reflecting a broad-based moderation in food and fuel prices. At its policy meeting earlier in October, the RBI’s Monetary Policy Committee kept the repo rate unchanged at 5.50%, maintaining a neutral stance.
Over the past two years, the RBI has cautiously shifted from an aggressive tightening stance to a measured easing cycle, cutting the policy repo rate in small, data-dependent steps to support growth while keeping inflation anchored.
After holding rates steady through much of FY24 amid volatile food prices, the central bank began trimming the policy rate in mid-2025 as inflation moderated and investment momentum softened.
During calendar year 2025, the RBI has implemented three repo-rate cuts so far in 2025, two cuts of 25 basis points each in February and April, followed by a larger 50 basis-point cut in June.
“By contrast, bond yields in large emerging market countries have remained broadly stable, reflecting stronger inflation targeting frameworks and well-contained inflation. Improved central bank independence and deeper domestic markets have also helped anchor yields,” Moody’s report said.
“We expect long-term yields of the advanced economies will level off close to current levels. However, the global bond market is displaying a fair bit of fragility given the speed of geopolitical developments and will remain extraordinarily sensitive to fiscal policy risks,” it added.