India’s July-September growth estimated at 7.35%; oil price volatility poses risks: Finance Ministry

India’s economy is estimated to have grown by 7.35 per cent in the July-September quarter of FY27, supported by domestic demand, industrial activity and higher consumption, according to the Finance Ministry’s October Monthly Economic Review.

The estimate, based on the ministry’s nowcasting model, follows 7.8 per cent growth in the April-June quarter.

“Following real GDP growth of 7.8 per cent in Q1 FY27, the Department's nowcasting model, introduced in the Economic Survey 2025-26, nowcasts real GDP growth of 7.35 per cent in Q2 FY27,” the report said.

Gross GST collections rose around 15 per cent in July-September, compared with 8.4 per cent in the previous quarter. Domestic automobile sales increased by around 25 per cent year-on-year, while industrial production, electricity consumption and port traffic also supported growth.

“Taken together, these indicators point to sustained growth momentum in Q2 FY27,” the review stated.

Improving purchasing managers’ index (PMI) readings and business sentiment also indicated a positive outlook.

“Industrial activity remained firm, with the Index of Industrial Production (IIP) expanding by 8.0% year-on-year in August 2026, led by 9.0% growth in Manufacturing. The Index of Core Industries (ICI) grew by 7.9% YoY in September 2026,” it said.

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West Asia crisis, inflation remain concern

Retail inflation, measured by the Consumer Price Index (CPI), rose by 71 basis points to 5.54 per cent in September. However, around 64 per cent of items in the CPI basket recorded inflation below the RBI’s 4 per cent target.

“For Q2FY27, CPI inflation averaged 4.94%, which is aligned with the RBI’s forecast for the period. As inflationary pressures persist, the RBI has hiked the repo rate by 25 basis points and changed its stance from neutral to calibrated tightening,” the report said.

The ministry warned that geopolitical tensions, crude oil price volatility and tighter global financial conditions could affect India’s outlook.

“Overall, while persistent geopolitical frictions, energy price volatility and global financial tightening remain key headwinds, the Indian economy may remain well-positioned to sustain its expansionary trajectory through the rest of FY27,” the review stated.

Domestic consumption, investment, structural reforms, credit growth and recent trade agreements are expected to support economic activity. The IMF has projected 7 per cent growth for India in FY27, while the World Bank, OECD and RBI have each forecast 7.1 per cent.

Foreign exchange reserves support stability

Strong merchandise exports and a surplus in services helped cushion India’s trade balance. Capital inflows, particularly banking capital, financed the wider current account deficit between April and August FY27.

“Although external strain on the rupee persists, India’s foreign exchange reserves position is currently adequate by standard reserve adequacy metrics, providing an import cover of 10.3 months,” the report said.