India’s Q2 growth seen at 7.3% as global risks test outlook: Finance Ministry

India’s economy is expected to grow by 7.3 per cent in the second quarter of FY27, supported by resilient domestic demand and investment, the Ministry of Finance said in its Monthly Economic Review for September 2026.

The projection comes after the economy expanded 7.8 per cent in the first quarter of FY27, the highest first-quarter growth under the current GDP series.

The ministry said high-frequency indicators suggest that growth has continued into the second quarter, although at a more measured pace. While e-way bill generation and manufacturing activity have moderated, services activity strengthened in August, supported by new business and employment.

Healthy electricity and fuel consumption, sustained bank credit growth and stronger production of capital and infrastructure goods also point to continued investment momentum. Automobile sales across rural and urban markets indicate broad-based consumption demand, the ministry said.

The investment rate reached its highest level in the current series in the first quarter. Manufacturing grew 9.2 per cent, while services expanded 10 per cent, highlighting the broad-based nature of economic growth.

Exports remain strong

India’s external sector also showed resilience. Total merchandise and services exports rose 15.5 per cent year-on-year to USD 399.3 billion during April-August FY27.

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At the current run rate of nearly USD 400 billion in the first five months of the financial year, India’s overall exports could approach USD 1 trillion for FY27, the ministry said.

Merchandise exports grew 26.1 per cent in August, while the services trade surplus offset around 65 per cent of the merchandise trade deficit.

Global risks cloud outlook

Despite the strong domestic backdrop, the ministry cautioned that India’s growth performance cannot be taken for granted amid geopolitical tensions and disruptions to global supply chains.

Rising crude oil prices, uncertainty over trade relations with the United States and tariff pressures could weigh on investor sentiment. Higher interest rates in developed economies could also slow cross-border capital flows.

India’s foreign exchange reserves stood at USD 765.9 billion as of September 18, providing a substantial buffer against external vulnerabilities.

Inflation remains another risk. Retail inflation rose to 4.82 per cent in August, while elevated energy prices, weather disruptions, festive demand and higher input costs could create near-term pressure.

The ministry said consistent policymaking, stronger governance and greater competition would be important to sustain growth and attract investment.