New Delhi, August 2: India’s gross domestic product (GDP) growth rate could reach 7% in the first quarter of the fiscal year 2026-27, according to a new report. This projection comes amid improving economic conditions.
The report indicates that the Reserve Bank of India (RBI) had previously revised its GDP growth estimate for the first quarter of FY27 down from 6.9% to 6.6%, considering the ongoing conflict in West Asia.
SBI Research stated, “We now believe that the circumstances have changed, and the growth rate for the first quarter could be significantly better than anticipated.”
On the inflation front, imported inflation remained controlled until April 2026, as high global crude oil prices did not significantly impact petrol and diesel prices for Indian consumers.
The report noted, “The consumer price index (CPI)-based inflation is expected to remain above 5% in the next two quarters. However, the inflation rate for the first quarter was recorded at 3.9%. The overall inflation estimate for FY27 is currently set at 5%, which is within the RBI’s target range.”
Despite a slow start in June and a 40% deficit in rainfall, good rainfall in July has reduced the overall deficit to about 13%.
According to the report, most states, except for some food-producing states like Bihar and Andhra Pradesh, recorded good rainfall in July, which is considered the most crucial month for Kharif sowing.
The Indian Meteorological Department has projected below-normal rainfall (less than 94% of the long-term average) during the second phase of the southwest monsoon (August-September).
Additionally, the El Niño effect has begun since mid-June and is expected to strengthen further in the coming months. Given the current state of El Niño and its typical lifecycle, it is anticipated to persist until the autumn of 2027.
The report also highlighted that the major reservoirs in the country currently have adequate water storage, which is at normal levels, though slightly lower than last year. This is expected to improve as the monsoon progresses.
SBI Research added, “So far, Kharif sowing is only 4.7% lower than the levels of 2025, indicating a better crop yield. This is expected to have little to no impact on food inflation going forward. However, the late-acting El Niño could affect Rabi crops.”
Leave a Comment