India’s economy is expected to maintain a strong growth trajectory in the coming financial year, with Moody’s projectingreal GDP growth of 6.4 per cent in FY2026–27, the highest among G20 economies.
The global ratings agency said steady economic expansion will provide a solid foundation for financial stability and sustain credit demand across sectors. Growth is expected to be driven by robust domestic consumption, improving investment momentum, and supportive macroeconomic conditions.
Structural reforms, including rationalisation of the goods and services tax and income tax cuts, are likely to boost consumption and business confidence. A stable monetary policy stance is also expected to keep financial conditions accommodative.
TheReserve Bank of India (RBI)has echoed this optimism, raising its near-term growth projections. The central bank now expects GDP growth of6.9 per cent in Q1and7.0 per cent in Q2 of FY27, citing resilience in consumption and capital expenditure.
Moody’s said the strong economic backdrop should help banks maintain stable asset quality and healthy capital buffers, even as credit demand rises. Liquidity conditions are also expected to improve, with deposit growth broadly keeping pace with loan expansion.
However, the agency cautioned that competition for deposits could intensify, potentially pressuring banks’ low-cost funding. It also noted that while retail credit quality remains stable, outcomes may vary based on underwriting standards and borrower profiles.
Export-linked MSMEs could see gradual improvement following theIndia–US trade agreement signed in February 2026, which is expected to ease stress in the segment.
