Amid steady macroeconomic conditions, India is expected to retain its position as the fastest-growing major economy among G-20 nations in the coming fiscal year.
Moody’s Ratings on Monday projected India’s GDP growth at 6.4 per cent in the next fiscal, driven by strong domestic consumption, supportive policy measures, and a stable banking system. The forecast was shared in the agency’s banking system outlook report.
According to the report, asset quality in the banking sector will remain resilient, although some stress may persist among micro, small and medium enterprises. Even so, banks are expected to have sufficient buffers to absorb potential loan losses.
The agency said the operating environment for banks will stay strong in 2026, supported by robust macroeconomic fundamentals and ongoing structural reforms.
“We forecast India’s real GDP will grow 6.4 per cent for fiscal 2026-27, the fastest pace among G-20 economies, driven by strong domestic consumption and policy measures.
“The rationalisation 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.
Moody’s FY27 growth estimate is lower than the 6.8-7.2 per cent range projected in the Finance Ministry’s Economic Survey tabled in Parliament last month.
Official estimates indicate that India is likely to grow at a faster pace of 7.4 per cent in the current fiscal 2025-26, compared with 6.5 per cent growth recorded in 2024-25.
With inflation under control and growth momentum intact, Moody’s said the Reserve Bank of India is expected to further ease monetary policy in fiscal 2026-27 only if there are clear signs of an economic slowdown.
The RBI has already reduced its policy rate by a total of 125 basis points to 5.25 per cent in 2025.
Moody’s expects system-wide loan growth to rise slightly to 1113 per cent in fiscal 202627, from 10.6 per cent 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.
The agency added that banks will continue to maintain strong capitalisation, stable liquidity, and funding levels, with loan growth broadly matching deposit growth. It also reiterated expectations of continued government support for banks when required.
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