India’s Economic Growth: Finance Ministry Forecasts 7.3% Growth for Q2 as Economic Momentum Continues
India’s economy is projected to grow by 7.3% in the September quarter of the current financial year, according to the finance ministry’s Monthly Economic Review released on Thursday. This marks a slowdown from the 7.8% growth recorded in the April-June period. The ministry’s nowcasting measure, introduced in the Economic Survey earlier this year, indicates that the economy has started FY27 on a solid footing despite global uncertainties.
Economic activity remains firm despite slower momentum
The finance ministry noted that the growth momentum from the June quarter has continued into the second quarter, albeit at a slower pace. Some indicators, such as e-way bill generation and the manufacturing Purchasing Managers’ Index (PMI), have shown signs of moderation. However, services activity strengthened in August, driven by increased new business and employment. Electricity and fuel consumption also continued to grow robustly, while bank credit maintained strong expansion. The production of capital goods and infrastructure goods suggests ongoing strength in the investment cycle. Additionally, automobile sales have shown healthy growth across both rural and urban markets, reflecting broad-based consumption.
The ministry reported that industrial activity remains resilient, supported by strong manufacturing gross value added (GVA) growth and continued expansion in industrial production. Favorable monsoon conditions have contributed to kharif sowing levels being close to last year’s across several crops, which supports the outlook for agricultural output and rural demand.
Geopolitical risks continue to weigh on outlook
The finance ministry highlighted that geopolitical tensions, particularly the conflict in West Asia, have disrupted energy markets and trade routes, posing challenges for economies worldwide. The report stated that external risks persist, including renewed geopolitical tensions and the weaponization of supply chains, which contribute to volatile energy prices and tightening global financial conditions. To maintain growth, the ministry emphasized the need for macroeconomic stability and economic resilience. A recent sovereign rating upgrade from Japan Credit Rating Agency, which raised India’s rating from BBB+ to A- in September, was cited as a sign of strengthening economic fundamentals.
The report also stressed the importance of sustaining industrial momentum while increasing scale, domestic value addition, supply-chain depth, and export competitiveness to broaden the manufacturing base.
Global agencies also raise India’s growth forecasts
The finance ministry’s latest estimate follows several global institutions raising their growth forecasts for India’s FY27. The OECD has increased its forecast to 7.1% from 6.3%, while S&P Global Ratings and the Asian Development Bank have raised their projections to 7% from 6.6%. Fitch Ratings has also increased its forecast to 6.9% from 6.4%. Moody’s Ratings has revised its FY27 growth forecast to 7% from 6%, citing India’s resilience amid the West Asia conflict. However, these agencies have flagged risks such as higher energy prices, geopolitical tensions, and supply-chain disruptions, which could impact inflation, household purchasing power, and growth. The Reserve Bank of India’s FY27 growth estimate stands at 6.7%.
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