Industrial production and manufacturing sentiment are staying firm due to strengthening order books and healthy credit expansion across key sectors. However, volatile energy costs, geopolitical instability, and supply-chain friction pose persistent risks to corporate investment decisions and manufacturing margins. To counter these external pressures, robust merchandise shipments alongside a reliable services surplus have helped stabilize the trade balance amid regional conflicts. Furthermore, robust capital inflows, notably banking capital, successfully funded a widening current account deficit between April and August of FY27.
Key points
Expanding credit, healthy domestic demand, and trade pacts are sustaining growth despite…: Expanding credit, healthy domestic demand, and trade pacts are sustaining growth despite broader global challenges.
Fluctuating energy prices, geopolitical tensions, and supply bottlenecks continue to thre…: Fluctuating energy prices, geopolitical tensions, and supply bottlenecks continue to threaten corporate manufacturing expenditures.
A steady services surplus alongside resilient merchandise exports is helping mitigate ext…: A steady services surplus alongside resilient merchandise exports is helping mitigate external trade headwinds.
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NEW DELHI: Amid a challenging global environment, the Indian economy is well positioned to sustain the growth momentum for the rest of the financial year 2026-27 and is expected to expand 7.35% during the July-Sept quarter on the back of strong domestic demand, investment and structural reforms, the finance ministry said in its monthly economic review Thursday.
While RBI has projected 7.1% growth for the full financial year, most global agencies too estimate the Indian economy to expand 6.9-7.1% this year after the first quarter official estimates pegged the growth rate at 7.8%. "Healthy credit growth and recent trade agreements are expected to provide additional support to consumption, investment and exports," it said.
The review said the near-term industrial outlook remains supported by firm production, strengthening of order flows, improved manufacturing sentiment and robust industrial credit, though, uncertainty around energy prices, supply-chain pressures and geopolitical developments remain relevant for manufacturing costs and investment decisions. "Sustaining industrial momentum while translating policy support into greater production at scale, higher domestic value addition and stronger export competitiveness will remain important," it said.
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