India Growth Forecast Up
Jefferies and Moody's Raise India Growth Forecasts Up to Seven Percent
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Key Points
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Jefferies reported that bank credit grew 17.8% year on year in July, with lending to MSMEs rising 24.9%, industrial credit increasing 20%, services credit 22.9% and corporate lending 21.6%.
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Jefferies said GST receipts rose 14.8% year on year in August, while power-demand growth accelerated to 9.4% in April-August from 1.8% in January-March, providing evidence of stronger domestic activity.
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Residential real-estate sales across India’s seven largest cities increased 7% year on year during the first seven months of the current calendar year, reversing a 1% decline recorded in 2025.
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Moody’s said India’s real GDP growth reached 8.2% year on year in the first six months of calendar 2026, compared with 7.3% for the whole of calendar 2025, supported by private consumption and gross fixed capital formation.
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Moody’s cautioned that India’s debt reduction is likely to remain gradual and debt affordability weaker because of the country’s high debt burden and elevated interest-cost structure; it also said diversified crude-import sources and sizeable foreign-exchange reserves provide buffers against external shocks.
India's economic growth outlook has brightened sharply, with two major forecasters raising their projections. Jefferies expects real GDP growth of 6.5%–7% this fiscal year, while Moody's lifted its forecast for 2026–27 to 7%, up from 6%. Both cited strong domestic demand, accelerating bank lending, and robust services activity as key drivers.
The upgrades signal renewed momentum after slower growth earlier this year. Jefferies pointed to bank credit growth of 17.8% year-on-year in July, rising tax collections, and surging power demand as signs of strengthening economic activity. Moody's said India could remain the fastest-growing G20 economy, though warned that oil-price spikes and Middle East tensions could threaten the outlook.
Bank Credit and MSME Lending Accelerate
Bank credit growth hit 17.8% year-on-year in July, a marked acceleration. Jefferies found lending to micro, small and medium enterprises (MSMEs) jumped 24.9%, industrial credit rose 20%, and services lending climbed 22.9%. Corporate lending grew 21.6%, suggesting private companies are investing again after months of caution.
Tax Collections and Power Demand Show Strength
Two key economic indicators point to broadening growth. Jefferies reported GST receipts rose 14.8% year-on-year in August. Power-demand growth surged to 9.4% in April–August, compared with just 1.8% in January–March, revealing a sharp turnaround in industrial and commercial activity across the country.
Real Estate and Corporate Earnings Gaining Traction
Housing sales are bouncing back. Residential sales in India's seven largest cities rose 7% year-on-year in the first seven months of 2025, Jefferies said, reversing a 1% decline the year before. Jefferies expects corporate earnings to jump from 14% growth this fiscal year to 17% next year, driven by rising investment and stronger consumer spending.
Moody's Cautions on External Risks and Debt
Moody's confirmed real GDP growth reached 8.2% in the first half of 2025, up from 7.3% for all of 2024. But the agency warned that elevated oil prices, Middle East conflict, and El Niño food-price pressures could raise inflation and dent consumption. Moody's also said India's high debt burden and interest costs mean debt reduction will be gradual, though large foreign-exchange reserves and diversified oil sources provide some protection.
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