Finance Ministry sees 7.3% GDP growth in July-September, far higher than RBI

The Ministry of Finance anticipates a GDP growth rate of 7.3% for the July-September quarter, significantly higher than the 6.4% forecast by the Reserve Bank of India (RBI). The finance ministry stated that growth momentum has continued into the second quarter of fiscal 2027, albeit at a more measured pace. This projection, known as "nowcasting," incorporates the most recent data to provide a more current forecast.

The RBI's earlier forecast of 6.4% was issued on August 5, preceding the statistics ministry's August 31 report showing a 7.8% GDP growth rate in the April-June quarter, which was higher than the central bank's initial projection of 7%. The RBI's Monetary Policy Committee is scheduled to meet the following week to announce its interest rate decision on October 7, at which point the central bank may revise its growth and inflation projections, including the nowcast.

The finance ministry cautioned that India should not rest on its post-Covid growth achievements due to geopolitical and global economic uncertainties. Factors such as increasing oil prices, rising global bond yields, strained US trade relations, and the AI bubble's anticipated deflation pose challenges in attracting capital flows.

However, the finance ministry noted that net foreign direct investment inflows are expected to improve this financial year compared to the previous one, providing some relief for Indian assets, including the currency. Despite rapid growth, the economy faces external pressures, including capital outflows and declining FDI inflows, which have put downward pressure on the rupee.

While the rupee briefly surpassed the 97-per-dollar mark in May, it currently trades at 95.98, bolstered by the RBI's concessional swap windows attracting $133 billion in Foreign Currency Non-Resident (Bank) deposits over three months. Foreign investors have sold Indian stocks and bonds worth $9.36 billion since July, compared to $16.59 billion in the same period last year.

Conversely, net FDI inflows have increased to a five-year high of $7.35 billion, resulting in positive net inflows in the first four months of the current fiscal year.