India's economy is showing signs of strong growth, with SBI Research projecting GDP expansion of 7.8% in the July-September quarter of FY27. The estimate is higher than the Reserve Bank of India's (RBI) projection of 7.2% and matches the growth recorded in the previous quarter.
The forecast is based on an analysis of 54 high-frequency economic indicators covering agriculture, industry and services. According to SBI Research, several indicators, including cement production, commercial vehicle sales, non-oil exports and port cargo, recorded improvements towards the end of the quarter.
However, some sectors showed signs of weakness, with mining production, tractor sales and airport passenger traffic witnessing declines.
SBI Research has also projected real Gross Value Added (GVA) growth of 8% to 8.2% for the second quarter, compared with 8.2% in the April-June quarter.
Nominal GDP Growth Could Accelerate to 11.5%
Apart from real GDP growth, SBI Research expects India's nominal GDP growth to improve during the second quarter.
Nominal GDP, which measures the value of economic output at current prices without adjusting for inflation, is projected to grow between 11% and 11.5%. This would be higher than the 10.3% growth recorded in the June quarter.
One of the factors supporting this projection is the increase in agricultural prices. According to SBI Research, agricultural prices rose by an average of approximately 7.8% during July-September, compared with 4.95% in the previous quarter.
However, real growth in agriculture and allied activities is expected to moderate from 3.6% to 2.8%.
Manufacturing and Services Sector Outlook
The manufacturing sector is expected to record real growth of 8.7%, while nominal growth is projected at 7.6%.
SBI Research estimates the manufacturing deflator at -1.1%. The report also highlights that input costs in several manufacturing industries remained higher than the prices of finished products.
This indicates that manufacturers have not been able to pass on the entire increase in production costs to consumers, potentially putting pressure on their profit margins.
Meanwhile, the services sector is expected to grow at 9.7% in the second quarter, slightly lower than the 10% growth recorded in the previous quarter.
Tractor Sales and Mining Output Witness Decline
Despite the positive overall GDP outlook, certain economic indicators have raised concerns.
Tractor sales, which had increased by 11.9% in June, declined by 18.1% in September. Similarly, mining output moved from 1% growth to a contraction of 6.2% during the same period.
These figures suggest that some segments of the economy are experiencing slower activity despite improvements in other sectors.
On the positive side, cement production, commercial vehicle sales, non-oil exports and port cargo recorded growth towards the end of the quarter, supporting the overall economic outlook.
SBI Research Expects GDP Growth to Slow in the Second Half of FY27
While the second quarter is expected to deliver strong growth, SBI Research believes India's economic momentum could moderate in the coming quarters.
According to its model, real GDP growth could slow to approximately 6.9% during the final two quarters of FY27.
This suggests that although India may outperform the RBI's second-quarter growth estimate, maintaining the same pace throughout the financial year could be challenging.
The overall outlook remains encouraging, with strong manufacturing activity and improving trade indicators supporting economic expansion. However, developments in agriculture, mining, services and consumer demand will remain important in determining India's growth trajectory during the remainder of FY27.
