India's FY27 growth forecast raised to 7.3% amid inflation
India's Ministry of Finance has upgraded its economic growth forecast for FY27 to 7.3%, significantly above global projections, despite persistent inflation and currency pressures.
India's Ministry of Finance has raised its economic growth forecast for the current fiscal year to 7.3%. The previous projection was 7.1%. This upgraded outlook for FY27, which runs from April 1, 2026, to March 31, 2027, contrasts with a global growth prediction of around 3%. The ministry warned that inflationary pressure and risks to the Indian rupee's exchange rate persist.
Domestic indicators show firm momentum. Growth in energy consumption, port cargo turnover, goods and services tax receipts, and automobile sales accelerated in the previous quarter. "India's growth momentum, by comparison, has held firm," the ministry stated. The country's foreign exchange reserves stand at about $721 billion, providing a buffer.
Inflation and price pressures persist
Consumer price inflation was 5.54% year-on-year in September 2026. The wholesale price index rose more sharply, by 11.39%. Food costs remain a significant driver. Food index inflation hit 8% in rural areas and 7.18% in urban centers.
Fuel and electricity prices were 25.85% higher in September than a year earlier. This surge contributes to broader price pressures. Oil prices and global uncertainty are cited as ongoing inflation risks. The El Niño weather phenomenon also poses a threat to soil moisture ahead of winter sowing.
Currency and external risks
The Indian rupee has been weakening against the US dollar for five consecutive years. Its decline accelerated over the last 15 months. Despite this prolonged pressure, the ministry asserts India is 'well-positioned' to weather currency risks. It points to sufficient capacity to counter external shocks and sustain growth.
Energy demand and supply dynamics
Power demand has surged, growing more than 10% year-on-year so far this financial year. Generation in October 2026 was up 24% year-on-year month-to-date. This demand is straining supply. Coal stocks at thermal plants have dropped to just six days of consumption, down from 15 days a year ago.
Thermal plant utilisation has risen to 68% in FY27 so far, up from 62%. Average electricity prices in the merchant power market reflect the strain. They rose 46% year-on-year to Rs 5.7 per unit in the July-September quarter. Prices in October were 2.6 times higher than a year earlier, reaching Rs 7.1 per unit.
The renewable energy sector is expanding rapidly. Its generation rose 26% year-on-year in FY27 so far. Renewable sources now account for 20% of total power generation, up from 17%. The performance across different renewable sources varies significantly.
| Power Source | Year-on-Year Change (FY27 so far) |
|---|---|
| Solar | Up 47% |
| Hydro | Down 12% |
Hydro generation declined due to below-average monsoon rainfall.
Future power outlook and capacity growth
The government has raised its FY27 power demand growth forecast to 9% from 7%. Analysts expect demand to rise another 6% in FY28. Total power demand is projected to reach 2,219 billion units by FY30, up from an estimated 1,709 billion units in FY26.
Meeting this demand will require massive capacity addition. Renewable energy project awards are increasing, with 8.3 gigawatts awarded in FY27 up to October, compared with 7.7 GW in the same period last year. Renewable energy capacity is expected to account for 52% of India's total installed power capacity by FY30, a major increase from 44% currently.
