Impact of Twin Shocks on FY27 Economy: Energy Crisis and El Nino

A foreign brokerage predicts that twin shocks from the energy crisis and El Nino-induced deficient rainfall will lower India's GDP growth to 6% in FY27 from 7.4% in FY26. These factors are anticipated to increase inflation, prompting the Reserve Bank to potentially hike interest rates twice in FY27.

A foreign brokerage has reported that India's GDP growth is projected to decline to 6% in FY27, a drop from 7.4% in FY26, influenced by the twin crises of an energy shortage and deficient rainfall associated with El Nino.

These compounding issues are expected to drive inflation higher, possibly leading the Reserve Bank to raise key lending rates twice in the upcoming fiscal year to address the rising consumer prices.

Oil prices have surged due to conflicts in West Asia, affecting the economic outlook further and impacting rural households and small businesses. The brokerage emphasized the need for close monitoring of the FY27 outlook, especially in the face of potential inflation increases driven by high temperatures.