India’s real GDP growth likely to remain at 7-7.2 pc in FY27

New Delhi, Aug 30 (IANS) India’s real GDP growth is likely to remain resilient at 7-7.2 per cent in FY27, supported by robust domestic demand and the government’s continued focus on capital expenditure, while nominal GDP growth could reach 12.5-13 per cent, according to a report by EY.

The firm said India’s growth outlook remains relatively strong despite geopolitical uncertainties, elevated crude oil prices and a weaker global trade environment. Strong domestic economic activity and sustained public investment are expected to provide support to growth through the year.

Industrial activity has also shown signs of strengthening. According to EY, growth in the Index of Industrial Production (IIP) accelerated to a 23-month high of 7.3 per cent in June 2026. As a result, average industrial growth during the first quarter of FY27 rose to 5.7 per cent, the highest level in eight quarters.

Manufacturing remained a key contributor to the improvement, with output increasing 7.8 per cent in June. Electrical equipment, motor vehicles, textiles and food products were among the stronger-performing segments.

However, some high-frequency indicators suggest that the pace of expansion may be moderating. Manufacturing PMI declined to 53.5 in July from 54.2 in June, while services PMI fell more sharply to 53.3 from 57.4. Despite the moderation, both indices remained above the 50-point mark, indicating that economic activity continued to expand.

Credit conditions have also remained supportive. EY noted that gross bank credit growth accelerated to a 25-month high of 18.6 per cent in June, indicating continued availability of financing for businesses and other segments of the economy.

The government’s capital expenditure push is another key factor supporting the growth outlook. Government capex growth recovered sharply to 23.7 per cent in the first quarter of FY27, following a contraction of 23.3 per cent in the fourth quarter of FY26.

At the same time, the fiscal deficit remained contained at 18.2 per cent of the annual budget target. EY said the renewed momentum in capital expenditure should help sustain domestic demand and strengthen the prospects for real GDP growth.

–IANS

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