New Delhi: India’s real GDP is expected to grow 7-7.2 per cent in FY27, supported by strong domestic demand and higher government capital expenditure, according to an EY report.
Nominal GDP growth is projected at a stronger 12.5-13 per cent during the financial year.
Domestic Economy Remains Resilient
EY said India’s growth outlook remains relatively strong despite geopolitical uncertainty, elevated crude oil prices and weakness in global trade.
Domestic economic activity and sustained public investment are expected to provide support through FY27.
Industrial production has also strengthened.
Growth in the Index of Industrial Production (IIP) accelerated to a 23-month high of 7.3 per cent in June 2026.
Average industrial growth during the first quarter of FY27 consequently improved to 5.7 per cent, the highest in eight quarters.
Manufacturing Leads Industrial Growth
Manufacturing output expanded 7.8 per cent in June.
Electrical equipment, motor vehicles, textiles and food products were among the stronger-performing sectors.
However, some high-frequency indicators showed signs of moderation.
Manufacturing PMI declined to 53.5 in July from 54.2 in June.
Services PMI fell more sharply to 53.3 from 57.4.
Both indicators nevertheless remained above the 50 level, signalling continued expansion in economic activity.
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Bank Credit Growth Accelerates
Financing conditions also remained supportive.
Gross bank credit growth accelerated to a 25-month high of 18.6 per cent in June, indicating healthy availability of credit across the economy.
Government capital expenditure provided another major boost.
Capex growth rebounded sharply to 23.7 per cent during the first quarter of FY27 after contracting 23.3 per cent in the fourth quarter of FY26.
Meanwhile, the fiscal deficit remained contained at 18.2 per cent of the annual Budget target.
EY expects renewed government capital expenditure, resilient domestic demand and improving industrial activity to support India’s growth momentum despite external economic risks.
