Ratings agency Moody’s has raised its GDP growth forecast for India’s 2026–2027 fiscal year to 7% from 6%, citing the economy’s resilience to global shocks, including the Middle East conflict. High domestic consumer demand, infrastructure spending, and a booming services sector helped lift GDP by 8.2% in the first half of the year, underpinning the upgrade.

Analysts expect India to outpace every other G20 economy, yet the sovereign rating remains a modest Baa3. Moody’s warns investors of a classic Indian paradox: vast, diversified growth potential is offset by heavy public debt and persistently low household incomes.

Geopolitics is the chief near‑term risk. A protracted Middle East crisis could keep oil and fertilizer prices high, stoking inflation above the 4.8% target and widening the current account deficit. Policymakers’ appetite for spending is another worry: plans to trim the federal deficit to about 4.3% could be derailed by continued increases in defence outlays and megaproject infrastructure spending.