Bank of America revised down its projection for India’s fiscal 2027 economic growth to 6.5% from 7.0%, according to a research note released today. The adjustment reflects the continuing fallout from the West Asia conflict as it enters its fourth month.
The bank’s update follows official quarterly data for India. Q1 2026 GDP expanded 7.8% year-on-year, a touch below the previous quarter’s 8.0% pace but above Bank of America’s own 7.4% estimate. For the whole of fiscal 2026, GDP growth came in at 7.7%.
Nominal GDP growth during fiscal 2026 remained muted at 8.9%, with the GDP deflator easing to 1.2% from 9.7% in fiscal 2025. Bank of America also revised the Q3 fiscal 2026 growth figure upward to 8.0% from an earlier 7.8%.
Sectoral performance in the closing quarter of fiscal 2026 showed mixed dynamics. Manufacturing slowed to 7.3% growth in Q4 from an average near 12% across the first three quarters of the year, a sign that conflict-related disruption has begun to affect industrial activity. Services output expanded by 9.9% in the quarter, while agricultural GVA rose 3.6% compared with 1.7% in the prior quarter.
Domestic demand indicators were resilient but uneven. Consumption increased 7.1% and gross capital formation rose 10.8%. By contrast, external demand softened: export growth fell to 3.7%, and import growth moderated to 1.9%.
The Reserve Bank of India today kept its policy repo rate unchanged at 5.25% and maintained a neutral stance. In its own update the central bank trimmed its fiscal 2027 GDP forecast to 6.6% and raised its inflation projection to 5.1%.
Bank of America said it expects the RBI to tilt its focus toward inflation control amid persistent supply shocks and uncertainty around the monsoon. In line with that view, the bank advanced its expected first rate hike for India to August 2026 from December 2026, and indicated further increases could follow in December 2026 and February 2027.
Under Bank of America’s baseline assumptions, fiscal 2027 growth of 6.5% is modeled using a crude oil price forecast of $92.50 per barrel. The firm projects a recovery in activity to 7.5% in fiscal 2028, conditional on its baseline oil price path.
The research note also referenced the crude benchmark ticker XBR/USD in the context of oil price assumptions used in the forecast modeling.
Data points referenced
- Q1 2026 GDP: 7.8% year-on-year
- Full fiscal 2026 GDP growth: 7.7%
- Nominal GDP growth fiscal 2026: 8.9%; GDP deflator: 1.2%
- Q4 fiscal 2026 manufacturing: 7.3%; services: 9.9%; agriculture GVA: 3.6%
- Consumption growth: 7.1%; capital formation: 10.8%; exports: 3.7%; imports: 1.9%
- RBI repo rate: 5.25%; RBI fiscal 2027 GDP forecast: 6.6%; RBI inflation forecast: 5.1%
- BofA baseline crude oil projection: $92.50 per barrel