India’s economy is estimated to have grown 7.3% in the September quarter of the current financial year, slowing from the 7.8% expansion recorded in the April-June period, according to the finance ministry’s latest Monthly Economic Review released on Thursday.The ministry said the economy had started FY27 on a firm footing despite growing uncertainty in the global environment. Its nowcasting measure, introduced in the Economic Survey earlier this year, projected real GDP growth of 7.3% for the second quarter.India recorded 7.8% real GDP growth in the first quarter, the highest first-quarter growth in the current GDP series.
Economic activity remains firm despite slower momentum
The ministry said the growth momentum seen in the June quarter had continued into the second quarter, although at a more measured pace.Some indicators showed signs of moderation, with e-way bill generation and the manufacturing Purchasing Managers’ Index (PMI) growing more slowly.At the same time, services activity strengthened in August, helped by stronger new business and employment, the report said.Electricity and fuel consumption continued to register healthy growth, while bank credit maintained strong expansion. Production of capital goods and infrastructure goods pointed to continued strength in the investment cycle.Automobile sales also grew at a healthy pace across rural and urban markets, indicating broad-based consumption, according to the report.“Overall, industrial activity remained resilient, supported by strong manufacturing GVA growth, continued expansion in industrial production and strengthening bank credit to industry,” the ministry said.The report said monsoon conditions had been more favourable than anticipated earlier, with kharif sowing close to last year’s levels across several crops.This supports the outlook for agricultural output and rural demand, although rabi prospects will need to be monitored.
Geopolitical risks continue to weigh on outlook
The finance ministry said the conflict in West Asia had disrupted energy markets and trade routes, creating challenges for economies globally.“Nevertheless, external risks persist, with renewed geopolitical tensions and the growing weaponisation of supply chains, keeping energy prices volatile, tightening global financial conditions, and disrupting trade routes,” the report said.The ministry said maintaining growth would require preserving macroeconomic stability and strengthening economic resilience.It also highlighted a recent sovereign rating upgrade as an indication of strengthening economic fundamentals. Japan Credit Rating Agency raised India’s rating from BBB+ to A- in September.The report said sustaining industrial momentum would remain important, alongside efforts to increase scale, domestic value addition, supply-chain depth and export competitiveness.“Going forward, sustaining industrial momentum while increasing scale, domestic value addition, supply-chain depth and export competitiveness will remain important for broadening the manufacturing base,” it added.
Global agencies also raise India’s growth forecasts
The latest government estimate comes after several global institutions raised their forecasts for India’s FY27 growth following the stronger-than-expected 7.8% expansion in the April-June quarter.The OECD raised its FY27 forecast to 7.1% from 6.3% previously, while S&P Global Ratings and the Asian Development Bank raised their projections to 7% from 6.6%. Fitch Ratings increased its forecast to 6.9% from 6.4%.Moody’s Ratings also raised its FY27 growth forecast to 7% from 6%, citing India’s resilience amid the West Asia conflict.The agencies have, however, flagged risks including higher energy prices, geopolitical tensions, supply-chain disruptions and their potential impact on inflation, household purchasing power and growth.The Reserve Bank of India’s FY27 growth estimate stands at 6.7%.