India GDP Growth Seen At 7.3% In Q2 FY27 Amid Geopolitical, Trade Risks: Finance Ministry In Sep Economic Review
· Free Press Journal
India’s economy is expected to expand 7.3% in the second quarter of FY27, according to the Finance Ministry’s nowcasting model.
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However, the ministry has cautioned that economic momentum has moderated and that geopolitical, trade and financial uncertainties could affect the outlook.
In its September Monthly Economic Review, the ministry said growth had continued into Q2 FY27 but at a slower pace.
E-way bill generation and manufacturing Purchasing Managers’ Index (PMI) growth moderated, while services activity improved in August, supported by stronger new business and employment.
The nowcasting estimate, introduced in the Economic Survey earlier this year, follows 7.8% real GDP growth recorded in the April-June quarter.
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High-frequency indicators for July and August suggested some moderation after the strong first-quarter performance. The Finance Ministry also highlighted continuing uncertainty in India’s trade relationship with the US.
The review referred to the Graham Bill and its presidential assent, which enables the US President to impose tariffs of up to 100% on countries purchasing Russian crude oil.
The ministry also noted that the global artificial intelligence investment boom is influencing international capital flows, while developed economies are competing to attract investments linked to new manufacturing capacity.
It said India, like other developing economies, faces challenges in attracting capital. Nevertheless, net foreign direct investment is expected to perform better in FY27 than in FY26.
Net FDI increased to $13.4 billion during April-July 2026 from $9.7 billion a year earlier, while gross FDI stood at $43.9 billion.
Inflation risks from climate and crude prices
The Finance Ministry also identified several risks to inflation, including climate conditions, geopolitical tensions and tighter monetary conditions.
It warned that a strong El Niño could affect the upcoming Rabi crop through heat stress and lower soil moisture, although a favourable Indian Ocean Dipole could partly offset the impact.
Higher crude oil prices and geopolitical tensions could increase imported inflation, while festive demand and rising input costs may add near-term pressure.
Retail inflation rose to 4.82% in August, with food inflation at 5.95%. Core inflation increased to 4.16% from 3.86% in July, while wholesale inflation rose to 9.92%.