New Delhi
India’s real GDP growth is likely to remain resilient at 7–7.2 per cent in FY27, supported by strong domestic demand and the government’s continued focus on capital expenditure, according to an EY report.
The report said nominal GDP growth could reach 12.5–13 per cent, despite geopolitical uncertainties, elevated crude oil prices and a weaker global trade environment. Strong domestic economic activity and sustained public investment are expected to provide key support to growth during the year.
Industrial activity has also shown signs of improvement. EY said 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 rose to 5.7 per cent, its highest level in eight quarters.
Manufacturing remained an important driver, with output rising 7.8 per cent in June. Electrical equipment, motor vehicles, textiles and food products were among the better-performing segments.
However, some high-frequency indicators pointed to a moderation in momentum. Manufacturing PMI fell to 53.5 in July from 54.2 in June, while services PMI declined more sharply to 53.3 from 57.4. Both remained above the 50-point threshold, indicating continued expansion.
Credit conditions have also supported economic activity. Gross bank credit growth accelerated to a 25-month high of 18.6 per cent in June, indicating strong financing availability.
Government capital expenditure growth recovered sharply to 23.7 per cent in Q1 FY27, after contracting 23.3 per cent in Q4 FY26. EY said renewed capex momentum should sustain domestic demand and support growth.
