The Finance Ministry, in its September edition of the Monthly Economic Review, said the Indian economy is estimated to have grown by 7.3 per cent in the September quarter (Q2) of the current fiscal year (FY27), though at a slower pace than the 7.8 per cent growth recorded in the June quarter. It noted that the economy began FY27 on a firm footing, even as the global environment grew more uncertain.
It said the conflict in West Asia disrupted energy markets and trade routes, testing economies across the world. India’s real GDP grew by 7.8 per cent in the first quarter, the highest first-quarter growth in the current series. It added that the growth momentum of the June quarter extended into the second quarter of FY27, though at a more measured pace. E-way bill generation and the manufacturing PMI have grown more slowly, while services activity firmed up in August, driven by stronger new business and employment. Electricity and fuel consumption continue to register healthy growth, while bank credit has sustained its strong expansion. Production of capital goods and infrastructure goods points to continued strength in the investment cycle. Automobile sales have grown at a healthy pace across rural and urban markets, underscoring the breadth of consumption.
The report said most high-frequency indicators pointed to continued economic activity in the early part of Q2. The recent sovereign rating upgrade underscores the strengthening of India’s economic fundamentals, with Japan Credit Rating Agency raising India’s rating from BBB+ to A- in September 2026. Monsoon conditions have been more favourable than earlier anticipated, with kharif sowing close to last year’s levels across several crops. This supports the outlook for agricultural output and rural demand, although rabi prospects will require monitoring.
Nevertheless, external risks persist, with renewed geopolitical tensions and the growing weaponisation of supply chains keeping energy prices volatile, tightening global financial conditions and disrupting trade routes. Sustaining growth will therefore require preserving macroeconomic stability and strengthening economic resilience. Overall, industrial activity remained resilient, supported by strong manufacturing GVA growth, continued expansion in industrial production and strengthening bank credit to industry. The report added “Going forward, sustaining industrial momentum while increasing scale, domestic value addition, supply-chain depth and export competitiveness will remain important for broadening the manufacturing base.”
