Economic activity in India demonstrated resilience during the first quarter of FY27, despite the ongoing crisis in West Asia and other challenges. The National Statistics Office is set to release GDP estimates on August 31, with economists projecting a growth slowdown to approximately 7.2%, down from 7.8% in the previous quarter.
Forecasts for GDP growth within the June quarter vary, with estimates ranging from 6.9% by India Ratings & Research to 8% by the State Bank of India (SBI). Six of ten key high-frequency indicators declined sequentially, indicating a moderation in overall economic activity. Nonetheless, some sectors showed improvement, with increases in the index of industrial production, services Purchasing Managers’ Index, domestic aviation traffic, and bank credit.
Experts point to climate factors, such as heatwaves impacting agricultural output, but favorable reservoir levels have somewhat mitigated these effects. According to SBI data, 86% of over 50 leading indicators tracked across various sectors showed acceleration in Q1, up from 69% the previous year.
The Monthly Economic Review released by the finance ministry emphasized continued growth amid global uncertainties, although some high-frequency indicators indicated slight softening. Economists from CareEdge Ratings and Icra noted that while there are concerns regarding raw material availability and energy prices, strong macroeconomic indicators are improving growth outlook.
However, both Nayar and Sinha acknowledged a slowdown in the services sector, with various service sub-actors experiencing slower growth in April and May compared to the previous quarter.
Why this story matters:
- Understanding economic resilience in challenging times can inform policy and investment decisions.
Key takeaway:
- Despite a projected moderation in GDP growth, various indicators suggest underlying strength in the Indian economy.
Opposing viewpoint:
- Some economists caution that rising raw material costs and energy prices could constrain future growth.
