India's economy demonstrated robust performance in the first quarter of FY27, with real GDP growth reaching 7.8% at current prices, significantly outpacing the 6.9% recorded in the same quarter last year and beating the RBI's projection of 7%. According to the Ministry of Statistics and Programme Implementation (MoSPI), real GDP measured at constant 2022-23 prices is estimated at ₹81.36 lakh crore in Q1 FY27, up from ₹75.46 lakh crore in the year-ago period. Nominal GDP at current prices grew 10.3% to ₹88.27 lakh crore from ₹80 lakh crore a year earlier. This strong growth momentum was supported by industrial production, services activity, credit demand and investment spending, along with resilient consumption, as reported by SBI Research.
Manufacturing demonstrated strong performance in Q1 FY27, with manufacturing growth expanding 9.2% and secondary sector growth accelerating to 8.6% from 7.9% in the previous quarter. The latest Q1 FY27 data reveals a significant shift toward investment-led growth, with gross fixed capital formation (GFCF) growing 11.9% year-on-year, well ahead of private consumption growth of 7.1%. According to ETCFO, this represents an acceleration from the previous quarter's GFCF growth of 10.5%, with the sector's share of GDP reaching around 34%. The investment surge is being driven by both government capex front-loading and a pickup in private investment across certain sectors. SBI Research expects GDP growth at 7.3% in the second quarter, 7.2% in the third quarter and 6.9% in the fourth quarter of FY27, with the moderation from the first quarter's 7.8% largely reflecting normalisation from a strong base rather than loss of underlying momentum.
The deflationary pressure in manufacturing was primarily driven by the manufacturing deflator turning negative at minus 1.4%, suggesting input prices were rising faster than manufacturers' output prices. The GDP deflator rose to 2.3% in Q1 FY27 from 1.1% a year earlier, while the GVA deflator increased to 3% from 1.1%. Services remained the best-performing sector, expanding 10% in the first quarter, led by 12.1% growth in financial, real estate and professional services and 8.5% in trade, hotels, transport and communication services. Within services, trade, hotels and transport growth moderated to 8.5%, while public administration and defence services grew 7.5%. SBI Research noted that the GDP deflator rose to 2.3% in Q1 FY27 from 1.1% a year earlier, while the GVA deflator increased to 3% from 1.1%. HDFC Bank expects nominal GDP growth of 11% to 12% in FY27, assuming commodity prices stabilise and producers gain greater ability to pass higher input costs through to output prices.
SBI Research has raised its forecast for India's real GDP growth in FY27 to 7.3% from 6.6% earlier, citing resilient domestic demand and improving high-frequency indicators after the economy grew 7.8% in the first quarter. The research report raised the possibility of monetary policy action, saying robust credit growth globally, particularly in Asian emerging markets, could prompt central banks to consider rate moves. "Mint Street" could pursue a "shallow yet front loaded rate hike" amid the improving growth momentum and emerging price pressures. SBI Research also noted that the FY27 Budget has pegged the fiscal deficit at ₹16.96 lakh crore, or 4.5% of GDP on the new GDP base. Assuming nominal GDP growth of 10%, it estimated the fiscal deficit could be around 4.6% of GDP, while the Centre's debt-to-GDP ratio could be 57.1%. The report flagged risks from the West Asia conflict, energy prices and policy measures such as gold import curbs, while private consumption grew 7.1% in Q1, remaining the largest component of GDP despite moderating.
