India's Q2 growth pegged at 7.35%
What's the story
India's economy is projected to grow at a rate of 7.35% in the second quarter (Q2) of the fiscal year 2026-27 (FY27), according to the Finance Ministry's latest economic report. The estimate is based on a nowcasting model introduced in the Economic Survey for FY26. The model takes into account various indicators such as industrial output, energy consumption, port traffic, Goods and Services Tax (GST) collections, and automobile sales.
Global alignment
IMF revises India's growth forecast
The International Monetary Fund (IMF) has also revised its FY27 growth forecast for India to 7.0%.
Other international financial institutions such as the World Bank, OECD, and Reserve Bank of India (RBI) have projected a slightly higher growth rate of 7.1% for the same period.
This global alignment with India's internal projections further strengthens confidence in the country's economic resilience and potential for sustained growth despite external challenges.
Trade concerns
Inflation forecast revised upward
The ongoing West Asia crisis is pushing up global prices, leading to a revision in the inflation forecast for 2026.
The Finance Ministry has revised its inflation projection from 3.7% to 4.7%.
This increase in inflation could lead to tighter monetary policy and reduced purchasing power, potentially slowing down demand and impacting global trade patterns.
Economic resilience
Factors reinforcing domestic demand and private investment
Despite geopolitical tensions, energy price volatility, and tighter global financial conditions, India's economy is expected to maintain its growth momentum through the rest of FY27.
The Finance Ministry's Monthly Economic Review (MER) for October highlights strong industrial dynamics, resilient services activity, and robust domestic credit growth as key factors reinforcing domestic demand and private investment.
Policy interventions
Proactive measures to mitigate imported inflation risks
The Finance Ministry's report also highlights proactive supply-side measures and direct liquidity interventions by policymakers to mitigate imported inflation risks and maintain exchange rate stability.
These steps are aimed at ensuring that India's economic fundamentals remain strong enough to withstand uncertainties while promoting long-term, sustainable growth.
The ministry emphasized that a comfortable foreign exchange reserve buffer and steady upgrades to national growth projections further bolster this resilience.