India’s economy is projected to grow by 7.35 per cent in the second quarter of FY27 (Q2 FY27), according to the Ministry of Finance’s latest monthly economic report published on Thursday.
The optimistic outlook is backed by the ministry’s internal nowcasting model, which highlights sustained momentum across high-frequency indicators including industrial production, energy consumption, port freight traffic, Goods and Services Tax (GST) collections, and automobile sales.
Domestic Demand and Global Upgrades
The finance ministry’s growth projection aligns with upward revisions by major global multilateral institutions for India’s full-year FY27 performance:
- International Monetary Fund (IMF): Raised its FY27 GDP growth forecast for India to 7.0%.
- World Bank, OECD & RBI: Concurrently projecting full-year growth at 7.1%.
The report notes that robust domestic demand, expanding investment activity, and structural GST compliance reforms are easing working capital constraints for businesses. Furthermore, strong domestic credit growth and newly inked bilateral trade agreements continue to bolster overall consumption and merchandise exports.
Key Downside Risks: Energy Volatility and West Asia Conflict
Despite the positive growth trajectory, the Ministry of Finance highlighted several domestic and global downside risks that could impact output and input costs:
- Geopolitical & Energy Volatility: Continued escalation in the West Asia crisis and fluctuating crude oil prices pose ongoing risks to energy supply chains and maritime freight routes.
- El Niño Impact on Agriculture: A developing El Niño phenomenon threatens soil moisture levels ahead of the Rabi sowing season, though supply-side measures—such as stock limits on sugar and basic customs duty cuts on crude edible oils—are expected to buffer food inflation during the festive period.
- Global Tech Investment Shift: A potential slowdown in global artificial intelligence (AI) capital expenditure could impact trade, given its high import dependency.
External Sector and Rupee Stability
Addressing currency pressures and global headwinds, the ministry confirmed that India’s foreign exchange reserves remain resilient, providing a comfortable import cover of 10.3 months. Recent direct dollar liquidity measures introduced by the Reserve Bank of India (RBI) for public-sector oil marketing companies (OMCs) have further cushioned the Indian Rupee against extreme exchange-rate volatility.