Indias Real GDP Growth Expected to Reach 7-7.2% in FY27

New Delhi, August 30: India’s real GDP growth is projected to remain between 7% and 7.2% for the fiscal year 2027, supported by robust domestic consumption and increased government capital expenditure, according to a report by EY.

During this period, the nominal GDP growth rate could range from 12.5% to 13%.

The report highlights that despite geopolitical uncertainties, high crude oil prices, and a weak global trade environment, India’s growth outlook remains strong. It is expected that vigorous domestic economic activities and sustained government spending will bolster growth throughout the year.

EY noted signs of strength in industrial activities within India. The Index of Industrial Production (IIP) saw growth rise to 7.3% in June 2026, marking the highest increase in 23 months. Consequently, the average industrial growth for the first quarter of FY27 reached 5.7%, the highest in the past eight quarters.

Manufacturing played a crucial role in this improvement, with output increasing by 7.8% in June. Key sectors contributing to this growth included electrical equipment, automobiles, textiles, and food products.

However, some high-frequency indicators suggest that the pace of expansion may slow down. The Manufacturing PMI fell from 54.2 in June to 53.5 in July, while the Services PMI dropped sharply from 57.4 to 53.3. Despite this slowdown, both indices remained above the 50 mark, indicating ongoing economic activity.

The credit situation has also remained favorable. EY reported that gross bank credit growth surged to 18.6% in June, the highest in 25 months, indicating continued financing availability for businesses and other sectors of the economy.

The government’s focus on increasing capital expenditure is another critical factor supporting the growth outlook. Following a 23.3% decline in Q4 of FY26, government capital expenditure rebounded sharply in the first quarter of FY27, rising to 23.7%.

Additionally, the fiscal deficit remained at 18.2% of the annual budget target. EY suggests that the recent surge in capital expenditure should help sustain domestic demand and strengthen the prospects for real GDP growth.