Moody's said broad-based economic growth, strong domestic consumption and improving investment were helping India navigate external pressures. Sound macroeconomic fundamentals should also allow the economy to sustain growth close to 7% over the medium term, it added.The revised forecast comes after India's economy grew 7.8% year-on-year in the April-June quarter of 2026, beating expectations.

India's economy is better positioned to withstand the global energy supply shock triggered by the Iran war than previously anticipated, prompting credit rating agency Moody's to raise its growth forecast for the country to 7% for the financial year ending March 2027, from its earlier estimate of 6.5%.Moody's said broad-based economic growth, strong domestic consumption and improving investment were helping India navigate external pressures. Sound macroeconomic fundamentals should also allow the economy to sustain growth close to 7% over the medium term, it added.The revised forecast comes after India's economy grew 7.8% year-on-year in the April-June quarter of 2026, beating expectations.

Strong manufacturing activity, an investment boom and robust consumer demand contributed to the expansion.Why Moody's raised India's growth forecast Moody's said India had adjusted to the energy price shock better than it had previously expected.The country has been able to diversify its sources of crude oil and gas supplies, helping reduce its exposure to disruptions in global energy markets. State-backed oil marketing companies and tax cuts have also helped shield consumers from the immediate impact of higher energy prices.

The agency also pointed to signs of a potential revival in private sector investment.High-frequency indicators, including robust production and imports of capital goods, accelerating industrial credit growth and rising capacity utilisation, suggest that India could be approaching a new private capital expenditure cycle.A sustained pickup in private investment could provide another source of support for economic growth, alongside consumption and government-led infrastructure spending.Risks that could weigh on growthDespite the improved outlook, Moody's identified several risks that could affect India's growth trajectory.Rising and broadening price pressures could squeeze household consumption, while a deficient southwest monsoon could hurt agricultural output and weaken rural demand.Tighter monetary policy could also delay a recovery in private investment, particularly if higher borrowing costs discourage businesses from expanding capacity.India's inflation trajectory will be closely watched in the coming days. Consumer inflation data for October is scheduled to be released on Thursday.

Economists polled by Reuters expect headline inflation to rise to 5.93%, bringing it close to the upper end of the Reserve Bank of India's tolerance band.The Reserve Bank of India delivered its first interest rate hike in nearly four years in October. Markets are currently anticipating another 90 basis points of monetary tightening over the next 12 months.Moody's assessment, therefore, points to an economy supported by domestic demand and investment, but one that remains exposed to inflation, weather-related risks and tighter financial conditions.- Ends