New Delhi: India’s economy kept its momentum through the July to September quarter, growing by an estimated 7.35 per cent, the Finance Ministry said on Thursday. The estimate, published in the ministry’s October Monthly Economic Review, points to stronger factory output, tax collections and vehicle sales, even as high crude oil prices and sticky food inflation cloud the outlook for the months ahead.
The figure is a nowcast, not the official GDP number. It comes from a model introduced in the Economic Survey 2025-26, which tracks high frequency indicators such as industrial production, electricity use, port traffic, GST collections and automobile sales. The model had put growth at around 7.3 per cent for the same quarter in the September review. The ministry’s message is clear: domestic demand is doing much of the heavy lifting while the world economy slows.
Growth of 7.35 per cent would be a step down from the 7.8 per cent recorded in the April to June quarter, yet it would still leave India among the fastest growing large economies. The International Monetary Fund has raised its forecast for India to 7.0 per cent for FY27, while the World Bank, the OECD and the Reserve Bank of India have each projected 7.1 per cent. The IMF, by contrast, expects global growth to slow to 3.1 per cent in 2026.
Factories, GST and car sales all picked up
The review’s case rests on indicators that strengthened during the second quarter. Industrial activity stayed firm, led by manufacturing. The Index of Industrial Production expanded by 8.0 per cent year on year in August, with manufacturing up 9.0 per cent. The Index of Core Industries grew by 7.9 per cent in September.
Business sentiment moved the same way, with the HSBC India Manufacturing PMI rising to 55.1 in September from 52.8 in August.
On the demand side, gross GST collections grew by around 15 per cent in the July to September quarter, compared with about 8.4 per cent in the previous quarter. Domestic automobile sales rose by around 25 per cent year on year, with demand from both rural and urban markets. Taken together, the ministry said, these indicators point to sustained growth momentum.
The external sector held up better than many had feared. Total exports of merchandise and services grew by 11 per cent year on year in September, with merchandise exports up 23.1 per cent, led by electronics and engineering goods. Foreign exchange reserves stood at $721 billion as of October 16, and bank credit grew by 21.6 per cent year on year.
Inflation is the worry that will not go away
If growth is the good news, prices are the complication. Headline retail inflation accelerated by 71 basis points to 5.54 per cent in September. For the quarter as a whole, CPI inflation averaged 4.94 per cent, in line with the RBI’s forecast. Even so, 64 per cent of items in the CPI basket were still recording inflation well below the 4 per cent target, a reminder that pressure is concentrated rather than spread across everything households buy.
The RBI has responded, raising the repo rate by 25 basis points and shifting its stance from neutral to calibrated tightening.
The risks are familiar, and the review does not hide them. Elevated crude oil prices, higher food inflation and an uncertain Kharif crop outlook are all listed as headwinds. The rupee weakened 1.9 per cent against the dollar between April 2 and October 16, even with $721 billion in reserves behind it. Foreign portfolio investors pulled out $6.1 billion in September and a further $4.8 billion in October up to October 16, as high US Treasury yields and the conflict in West Asia kept global investors cautious.
What to watch in the second half
For the rest of FY27, the ministry expects domestic consumption, investment and structural reforms to keep supporting growth, with healthy credit growth and recent trade agreements adding support. Manufacturing, localisation and supply chain depth will matter too, as the government pushes to broaden the manufacturing base and lift export competitiveness.
But the balancing act is now the central challenge. Sustaining economic activity while safeguarding price stability will be the focus of policymakers in the second half of the year, the ministry said, warning that uncertainties remain considerable amid geopolitical frictions, energy price volatility and tighter global financial conditions.
FAQs
What is India’s estimated GDP growth for Q2 FY27?
7.35 per cent for July to September, according to the Finance Ministry’s October Monthly Economic Review. Growth was 7.8 per cent in April to June.
Is 7.35 per cent the official GDP figure?
No. It is an estimate from the ministry’s nowcasting model, which tracks indicators such as industrial output, GST collections and vehicle sales.
What drove growth in the quarter?
Stronger industrial production, GST collections up around 15 per cent, car sales up around 25 per cent, and exports of merchandise and services up 11 per cent in September.
What are the main risks flagged?
Elevated crude oil prices, higher food inflation, an uncertain Kharif crop outlook, rupee pressure and tighter global financial conditions.
What do global agencies forecast for India?
The IMF projects 7.0 per cent growth in FY27, while the World Bank, the OECD and the RBI project 7.1 per cent.
Whether that momentum holds through winter, with oil high and inflation sticky, is the question the second half will answer.
