New Delhi, April 6 -- International rating agency Moody's retained its Baa3 (BBB-) sovereign credit rating for India with a stable outlook, but warned that the ongoing conflict in the Middle East would moderate real GDP growth to 6% in FY27 and raise inflation risks.

The stable outlook incorporates India's gradually improving fiscal metrics since emerging from the pandemic and resilient growth prospects compared with peers, the ratings agency said, cautioning that fiscal accommodation in the context of the uncertain global macroeconomic outlook, including revenue-eroding measures, could impede progress towards debt reduction and exacerbate already weak debt affordability.

Moody's also predicted an increase in inflation this fiscal year,...