The Indian economy began FY27 on a firm footing, with real GDP growing 7.8 per cent in the first quarter — the highest Q1 growth in the current data series — even as global conditions grew increasingly uncertain, according to the Finance Ministry's Monthly Economic Review for September 2026, released on Thursday, 1 October 2026. The ministry's nowcasting model projects real GDP growth of 7.3 per cent in the fiscal second quarter (Q2 FY27), signalling a continuation of momentum at a more measured pace.

Broad-Based Q1 Expansion

The first-quarter expansion was driven across multiple sectors, with manufacturing, construction, and services all gaining strength. Domestic demand remained supportive, while investment emerged as an increasingly important growth driver, with the investment rate reaching its highest level in the current data series.

Real Industry GVA grew 7.7 per cent year-on-year in Q1 FY27, led by 9.2 per cent growth in manufacturing. The review noted that timely government measures to secure energy supplies and critical inputs, along with limited pass-through of global energy prices to domestic fuel prices, helped insulate domestic activity from external shocks — particularly the conflict in West Asia, which disrupted energy markets and trade routes worldwide.

High-Frequency Indicators Signal Continued but Moderated Growth

More recent data presents a mixed but broadly positive picture. The Index of Industrial Production (IIP) grew 6.7 per cent year-on-year in July, while the Index of Core Industries expanded 4.8 per cent. The Manufacturing PMI stood at 52.8 in August, remaining comfortably in expansion territory.

Services activity firmed in August, driven by stronger new business and employment. However, e-way bill generation and the manufacturing PMI have grown more slowly, indicating some moderation. Electricity and fuel consumption continue to register healthy growth, and bank credit has sustained its strong expansion — with credit to industry accelerating in July and growth broad-based across enterprise-size categories.

Inflation: Pressures Emerge but Basket Remains Anchored

Domestic price pressures intensified across retail, wholesale, and producer levels, driven by renewed global oil market pressures and weather-related volatility. Despite these developments, the review characterised the overall inflation landscape as predominantly anchored, noting that 69 per cent of items in the basket continue to record inflation well below the 4 per cent target.

This comes amid ongoing concerns about the broader impact of West Asia tensions on global energy prices, which could test the Centre's ability to maintain price buffers in subsequent quarters.

Exports on Track for Near-Trillion Dollar Year

The review flagged a significant milestone in trade performance. At a run rate of nearly USD 400 billion in the first five months of the financial year, India's overall export value for the full year could approach USD 1 trillion. The review attributed this trajectory in part to India's trade agreements, stating they are 'providing impetus to India's exports.'

Sector-specific indicators and recent policy measures have continued to deepen domestic capabilities across electronics and semiconductor value chains — areas increasingly seen as strategic pillars of India's industrial policy.

What to Watch in the Coming Months

With Q2 nowcast growth pencilled in at 7.3 per cent, the trajectory remains positive but faces headwinds from global energy volatility, uneven PMI signals, and the potential for further geopolitical disruption. Full-year export performance and the pace of credit expansion will be key variables in determining whether India sustains its growth leadership among major economies through the second half of FY27.