India’s Q2 FY27 growth estimated at 7.35 pc as economic momentum remains strong: FinMin Review

New Delhi: India's economic momentum remains strong, and the economy is projected to grow 7.35 per cent in the second quarter of FY27, according to Finance Ministry’s monthly economic review for the month of October released on Thursday.

The growth is supported by stronger industrial output, energy consumption, port traffic, GST collections, and automobile sales.

“Following real GDP growth of 7.8 per cent in Q1 FY27, the Department’s nowcasting model, introduced in the Economic Survey 2025-26, estimates real GDP growth of 7.35 per cent in Q2 FY27,” the Review noted.

Industrial activity remained firm, with the Index of Industrial Production (IIP) expanding by 8.0 per cent year-on-year in August 2026, led by 9.0 per cent growth in Manufacturing. The Index of Core Industries (ICI) grew by 7.9 per cent YoY in September. The HSBC India Manufacturing PMI strengthened to 55.1 in September from 52.8 in August, indicating a faster expansion in manufacturing activity.

“Recent policy, investment, and firm-level developments point to continued efforts to scale up manufacturing, localisation, and technological capabilities. Going forward, increasing scale, domestic value addition, supply chain depth, and export competitiveness will remain important to broadening the manufacturing base,” the Finance Ministry Review noted.

India’s external sector continued to demonstrate resilience in September 2026 amid heightened global uncertainty, with total exports of merchandise and services growing by 11 per cent (YoY). Merchandise exports, which grew by 23.1 per cent (YoY), were the principal driver of this growth, led by electronics and engineering goods.

India's external position also remained supported by comfortable foreign exchange reserves, which stood at $721 billion (as of October 16, 2026).

India’s financial sector demonstrated notable resilience during the period, remaining relatively insulated from rising global sovereign bond yields and volatile global equity markets. Transmission through the money market remained orderly, with market rates staying close to the policy repo rate and surplus liquidity effectively calibrated through fully subscribed OMO sales. Overall bank credit growth continued its strong momentum, expanding by 21.6 per cent year-on-year.

Overall, robust domestic demand, sustained investment activity, a resilient financial sector, and proactive supply-side management have underpinned India’s growth resilience so far, according to the finance ministry document.

“Uncertainties remain considerable. Amidst elevated crude oil prices, higher food inflation and uncertain outlook for the Kharif crop, sustaining economic activity while safeguarding price stability will be the focus of policymakers in the second half of the financial year,” it added.

Going forward, the efficacy of the recent rate hike in containing secondary inflation effects will depend on the central bank's active liquidity management, as per the Review.

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