SBI Research has projected India's Q1 FY27 GDP growth at 8%, significantly higher than the Reserve Bank of India's own projection of 7%. According to the latest SBI Research report, this estimate is supported by robust consumption and demand indicators that exhibit continued resilience of the Indian economy. The report notes that 86% of 54 high-frequency indicators accelerated in Q1FY27, compared to 69% in Q1FY26, indicating broad-based underlying momentum across agriculture, industry and services sectors. The services sector, the largest contributor to economic growth, revealed impressive growth with all indicators except freight and passenger traffic showing favourable trends.
As reported by PTI, the GST reforms implemented in September of the previous year provided significant economic stimulus through tax rate reductions on 375 items and the rationalization of the tax structure from a 4-tier system to virtually 2 slabs - 5% and 18%. However, BMI expects this fiscal boost from the GST reforms to diminish as the economy transitions into the new fiscal year. According to BMI's Asia-Pacific report, the company notes that as part of the GST reforms rolled out in September last year, tax rates on 375 items were cut and GST was rationalised from a 4-tier structure to virtually 2 slabs --- 5% and 18%.
According to BMI's analysis reported by PTI, inflation is expected to remain elevated, averaging 5.4% in the current fiscal year, which will continue to erode household incomes and contribute to the anticipated growth slowdown. S&P Global Ratings reports that retail inflation is expected to climb to 5.1% this fiscal year, representing a slight increase from previous projections. BMI has flagged additional downside risks from renewed US-Iran tensions, which could push oil prices higher and hurt consumption. This inflationary pressure represents a key factor in the projected moderation of economic expansion across multiple forecasting agencies.
Despite near-term challenges, S&P Global Ratings anticipates India's economic growth to rebound to 7.2% in 2027-28, with oil prices expected to stabilize. Economists now anticipate the Reserve Bank of India will raise rates in December or later, as core inflation remains low contrary to earlier expectations. According to the latest SBI Research report, credit growth continues to accelerate with Scheduled Commercial Banks credit growth at 17.7% and deposits at 12.7% for the fortnight ended July 15, 2026. The report estimates aggregate deposit growth at 14.5-15% and credit growth at 16-17% for FY27, with selected banks showing improvement in efficiency indicators.
On the weather front, the SBI Research report indicates that monsoon conditions have improved significantly from a nearly 40% rainfall deficit in June to surplus and normal rainfall in July and August, bringing the deficit down to around 12%. The report notes that government capital expenditure remains supportive with capex spending by 20 states at 10.5% of Budget Estimate in Q1FY27, compared to 10.9% in Q1FY26. July data and monsoon progress suggest continued growth momentum for the second quarter, with the Indian Ocean Dipole (IOD) potentially offsetting El Niño impact to a certain extent.
