India’s GDP growth seen at 6.6 per cent in FY27 as external risks weigh: YES Bank

India’s economic growth momentum is expected to moderate in FY27 after a strong performance in the current financial year, with global uncertainties and geopolitical tensions emerging as key risks, according to a report by YES Bank Economics Research.

The report has projected India’s real GDP growth at 6.6 per cent for FY27, while retaining a downside bias if the ongoing West Asia crisis extends and continues to keep crude oil prices elevated.

For FY26, YES Bank expects the Indian economy to remain resilient, estimating annual GDP growth at 7.6 per cent. The report said growth in the first three quarters was supported by strong manufacturing and services activity, with Q4FY26 GDP expected at 7.4 per cent after averaging 7.7 per cent in the previous three quarters.

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“FY27 is likely to see stronger headwinds to growth emerging out of the ongoing West Asia conflict that can have a multi-dimensional impact on growth,” the report said.

According to YES Bank, high-frequency indicators showed continued momentum in January and February but started moderating in March due to concerns around supply-chain disruptions, particularly in manufacturing.

The report noted that consumption trends remain mixed. While two-wheeler and passenger vehicle sales continued to show healthy volume growth, FMCG demand witnessed some moderation in both rural and urban markets. Rural consumption slowed due to a higher base, while urban consumption remained relatively stable.

YES Bank said private consumption, which benefited from higher real incomes, lower inflation, GST rationalisation and income tax reductions in FY26, could face pressure in FY27 due to higher prices, weakening discretionary spending and fading policy support.

The report also flagged risks to private investment as geopolitical uncertainty, rising input costs and concerns over demand could delay investment decisions.

Manufacturing, particularly MSMEs dependent on imported inputs such as oil and related products, may face pressure from supply-chain disruptions. Meanwhile, higher freight and insurance costs could weigh on exporters’ order books.

Despite these challenges, YES Bank expects government capital expenditure to remain supportive of growth even as fiscal pressures emerge from subsidies and energy-related costs.

“Overall, we project real GDP for FY27 at 6.6 per cent but retain a downside bias if the West Asia crisis elongates,” the report added.