India’s real GDP growth is likely to slow to 7% in the April-June quarter of FY27, marking a four-quarter low, according to rating agency ICRA. The estimate compares with 7.8% growth recorded in Q4 FY26.
ICRA said the moderation is expected to be driven mainly by a slowdown in the services sector, along with the impact of the ongoing West Asia tensions and uncertainty surrounding the monsoon.
Services-sector growth is projected to ease to around 7.9% in Q1 FY27, compared with 9.9% in the previous quarter. ICRA noted that most services-related indicators showed slower year-on-year growth during the first two months of the financial year.
Oil Refining Sector Faces Pressure
The West Asia conflict has pushed up commodity and raw-material costs, putting pressure on corporate margins. Oil refining companies faced sizeable losses during Q1 FY27, which is expected to weigh on overall gross value added (GVA) growth.
Despite these challenges, industrial activity has remained relatively resilient. ICRA estimates industrial GVA growth at 7.7% for Q1 FY27, while manufacturing volume growth is expected to have improved. However, higher input costs and weaker profitability could limit manufacturing GVA growth.
FY27 Growth Forecast at 6.7%
For the full financial year 2026-27, ICRA has projected India's real GDP growth at 6.7%, compared with 7.7% in FY26. The agency has warned that prolonged West Asia tensions and monsoon-related uncertainty could pose downside risks to the outlook.
Higher crude oil prices could further increase inflationary pressure and affect corporate profitability, investment and consumer demand if geopolitical tensions persist.
