India's economy is projected to grow at 7.35 per cent in the second quarter of FY27 (Q2 FY27), according to the Finance Ministry's monthly economic review for October 2026, released on Thursday, 29 October 2026. The estimate, drawn from the department's nowcasting model, follows a strong 7.8 per cent real GDP growth recorded in Q1 FY27 and is underpinned by broad-based momentum across industrial output, trade, and financial markets.

Industrial Output Driving the Momentum

Industrial activity remained firm through the review period. The Index of Industrial Production (IIP) expanded by 8.0 per cent year-on-year in August 2026, with manufacturing leading at 9.0 per cent growth. The Index of Core Industries (ICI) followed suit, rising 7.9 per cent year-on-year in September 2026.

The HSBC India Manufacturing PMI climbed to 55.1 in September from 52.8 in August, signalling a faster pace of expansion in the sector. The Finance Ministry review noted that recent policy, investment, and firm-level developments point to continued efforts to scale up manufacturing, localisation, and technological capabilities. It flagged that increasing domestic value addition, supply chain depth, and export competitiveness will be critical to broadening the manufacturing base.

Exports Surge, Forex Reserves Stay Comfortable

India's external sector showed notable resilience in September 2026 despite heightened global uncertainty. Total exports of merchandise and services grew by 11 per cent year-on-year, with merchandise exports surging 23.1 per cent, led by electronics and engineering goods. India's foreign exchange reserves stood at a robust $721 billion as of 16 October 2026, providing a substantial buffer against external volatility.

Financial Sector Resilient Amid Global Turbulence

India's financial sector demonstrated notable resilience, remaining relatively insulated from rising global sovereign bond yields and volatile equity markets. Money market transmission remained orderly, with market rates staying close to the policy repo rate. Bank credit growth expanded by 21.6 per cent year-on-year, reflecting sustained domestic demand and investment activity.

Surplus liquidity was effectively calibrated through fully subscribed open market operation (OMO) sales, the review noted, indicating active management by the central bank.

Risks on the Horizon

Despite the broadly positive picture, the Finance Ministry flagged significant uncertainties. Elevated crude oil prices, higher food inflation, and an uncertain outlook for the Kharif crop pose risks to price stability in the second half of the financial year. According to the review, 'Uncertainties remain considerable... sustaining economic activity while safeguarding price stability will be the focus of policymakers in the second half of the financial year.'

The review also cautioned that the efficacy of a recent rate hike in containing secondary inflation effects will depend on the central bank's active liquidity management going forward. This comes amid a global environment where major central banks remain hawkish, adding a layer of external pressure on capital flows and the rupee.

What the Numbers Signal for FY27

A 7.35 per cent Q2 estimate, if borne out in official data, would keep India on track as one of the world's fastest-growing major economies. Robust domestic demand, sustained investment, a resilient financial sector, and proactive supply-side management have collectively underpinned India's growth resilience so far in FY27, according to the Finance Ministry document. Analysts will now watch the upcoming RBI monetary policy decisions and inflation prints closely as indicators of whether the current growth trajectory can be sustained into the second half of FY27.