India cannot afford to take its growth performance for granted: Monthly Economic Report

India cannot afford to take its growth performance for granted amid rising geopolitical and economic uncertainties, the monthly economic report said, even as the domestic economy enters the second quarter of FY27 on a strong footing.

India’s real GDP grew 7.8% in the first quarter of FY27, the highest first-quarter growth in the current series, with manufacturing, construction and services contributing to the expansion. Domestic demand remained supportive, while investment emerged as an increasingly important driver, with the investment rate reaching its highest level in the current series.

The report’s nowcasting measure projects real GDP growth at 7.3% in the second quarter of FY27. High-frequency indicators point to continued economic activity, although some moderation has been visible. E-way bill generation and manufacturing PMI growth have slowed, while services activity strengthened in August. Electricity and fuel consumption, bank credit, capital goods production and infrastructure goods output continued to show resilience.

Industrial activity also remained firm, with real Industry GVA growing 7.7% year-on-year in Q1, led by 9.2% growth in manufacturing. IIP grew 6.7% in July, while the Index of Core Industries rose 4.8%.

However, the report flagged several external risks. Oil prices spiked in September, global bond yields have risen sharply and trade relations with the US remain unsettled. Geopolitical tensions and the growing weaponisation of supply chains could keep energy prices volatile, disrupt trade routes and tighten global financial conditions.

The report said India’s external sector remains resilient, supported by strong services exports, remittances, comfortable foreign exchange reserves and sustained capital inflows. Foreign exchange reserves stood at $765.9 billion as of September 18.

“India cannot afford to take its growth performance for granted,” the report said, adding that sustained high-quality, consistent and reasonably swift decision-making would be important to reassure investors.

The report also said India must work towards becoming more competition-friendly, with improved governance and enhanced state capacity key to building a competitive economy.