Private sector economists have significantly raised their growth projections for India following the government's strong April-June quarter performance. According to estimates from various economists, the Indian economy is expected to expand by 7-7.3% during 2026-27 financial year, marking it the fourth successive year when growth will breach the 7% mark. This projection is higher than the RBI's 6.7% projection in its latest monetary policy review, though the central bank had subsequently indicated that growth will be close to 7%. SBI raised its full year projections by 60 basis points to 7.3%, expecting the momentum to sustain with high frequency indicators such as industrial production, services activity, credit growth, investment spending and consumption seeing acceleration. The bank, however, expects growth to moderate to 7.2% in the current and next quarters and further slow to 6.9% in the March quarter, with the gradual moderation reflecting normalisation from Q1's strong base rather than a loss of underlying momentum.
Finance Minister Nirmala Sitharaman has confirmed that India can maintain its growth momentum at 7% or more in FY27, continuing the pace seen since the Covid-19 pandemic. Speaking to the Indian diaspora in Chicago, Sitharaman emphasized that "Since then (Covid), we are sustaining the growth at 7 per cent or more. This year too our growth will be in that range." The FM noted that India is likely to maintain its growth momentum despite geopolitical uncertainties and supply-chain disruptions following the US-Iran conflict and the closure of the Strait of Hormuz. As per Sitharaman, "Continuously keeping in touch with global uncertainties as much as understanding India's own requirements have kept us floating." The disruption in the Strait of Hormuz initially affected supplies of key commodities such as crude, petroleum products, and fertilisers to India, but the country managed to reroute supplies effectively. The government has also kept fertiliser prices unchanged for farmers through subsidies despite a sharp rise in international prices, demonstrating the administration's commitment to supporting agricultural sectors.
Global consultancy firm EY has provided an updated outlook for India's economic performance, projecting real GDP growth to remain resilient at 7-7.2% in FY27, supported by robust domestic demand and the government's continued focus on capital expenditure. The firm's projections align with S&P Global Ratings' earlier assessment of 6.6% growth in the current fiscal year, though EY's projections suggest slightly higher near-term performance. EY noted that India's growth outlook remains relatively strong despite geopolitical uncertainties, elevated crude oil prices and a weaker global trade environment. Meanwhile, Crisil has raised its FY27 GDP growth forecast to 7.0% from 6.6%, reflecting the strong first-quarter performance and encouraging early signals from the second quarter. The firm's analysis shows aggregate sales growth rose to 19.4% in the first quarter from 13.9% in the previous quarter, while manufacturing sales growth increased to 21.4% from 14.5.
Industrial activity has shown significant improvement with growth in the Index of Industrial Production (IIP) accelerating to a 23-month high of 7.3% in June 2026. According to EY, average industrial growth during the first quarter of FY27 rose to 5.7%, marking the highest level in eight quarters. Manufacturing remained a key contributor with output increasing 7.8% in June, with electrical equipment, motor vehicles, textiles and food products among the stronger-performing segments. However, some high-frequency indicators suggest moderation, as manufacturing PMI declined to 53.5 in July from 54.2 in June, while services PMI fell more sharply to 53.3 from 57.4. Despite the moderation, both indices remained above the 50-point mark, indicating continued economic expansion. The Reserve Bank of India's analysis of listed non-financial companies shows aggregate sales growth rose to 19.4% in the first quarter from 13.9% in the previous quarter, with manufacturing sales growth increasing to 21.4% from 14.5%.
Credit conditions have remained supportive with gross bank credit growth accelerating to a 25-month high of 18.6% in June, indicating continued availability of financing for businesses and other segments of the economy. The government's capital expenditure push has shown renewed momentum, with government capex growth recovering sharply to 23.7% in the first quarter of FY27, following a contraction of 23.3% in the fourth quarter of FY26. The fiscal deficit has been contained at 18.2% of the annual budget target, supporting the government's commitment to fiscal discipline. EY emphasized that the renewed momentum in capital expenditure should help sustain domestic demand and strengthen prospects for real GDP growth. Crisil notes that investment has been the only demand-side component to grow faster than GDP over the past four quarters, with merger and acquisition activity remaining robust and deal volumes doubling since FY17.
Sitharaman emphasized that the government would continue with systemic reforms and seek to mobilise more capital, particularly from overseas, as the economy expands. "Because of the ambitions that we have, we need capital. Therefore, my trip (to Canada and the US) and other ministers as well as the prime minister himself, all of us are talking to global funds," she said. The FM noted that "Showcasing what India has already done and hearing their expectations so that we can go back and provide clarity" is part of the effort to attract overseas investment. Last week, Commerce and Industry Minister Piyush Goyal also visited Japan, where he pushed to mobilise investments worth 10 trillion Japanese yen (around $60 billion) by 2035. The government's push to attract overseas capital comes amid a sharp slowdown in net foreign direct investment (FDI) inflows, with net FDI falling from an annual average of around $40 billion between FY20 and FY22 to $6.95 billion in FY26, according to RBI data. Despite the strong performance, Crisil warns that risks from a below-normal monsoon and an uncertain global environment continue to warrant caution.
