Finance ministry sees Q2 FY27 GDP growth at 7.3%, flags trade, crude and AI risks
The finance ministry expects India’s real GDP to grow 7.3% in Q2 FY27, above the RBI’s 6.4% forecast, but warned that global uncertainties could weigh on investment. US trade relations, tariff pressures, crude prices and the lack of an India angle in global AI developments are clouding investor interest.
The finance ministry has projected a 7.3% increase in India's GDP for the quarter ending September, surpassing the Reserve Bank of India's (RBI) forecast of 6.4%. However, the ministry cautioned that India, like other developing nations, faces significant challenges in attracting capital flows due to uncertainties surrounding US trade relations, crude oil price surges, and the lack of an India-specific focus in global artificial intelligence (AI) developments.
The ministry's nowcasting measure for Q2 FY27 anticipates a real GDP growth rate of 7.3%. Despite this positive outlook, the ministry emphasized that India cannot rely on its post-Covid growth achievements and must continue to earn growth each quarter. Policymakers are faced with the challenge of navigating geopolitical and geoeconomic uncertainties worldwide.
The report also indicated that net foreign direct investment inflows are expected to exceed last year's figures, although short-term pressures on Indian assets, including the currency, remain. The ministry noted that high-frequency indicators for July-August suggest a slight moderation in economic activity growth following the robust 7.8% GDP growth in the first quarter.
The ministry highlighted that the domestic economy continues to demonstrate resilience in a challenging global environment, which is a significant asset. Investor interest in India is currently cautious due to near-term uncertainties, such as the state of US trade relations, tariff pressures, crude oil price fluctuations, and the absence of an India focus in AI-related global developments.
However, as these challenges slowly subside, India's inherent growth potential will attract the attention it rightly deserves from investors. The ministry stressed that India must work towards becoming more competition-friendly rather than merely business-friendly, as a competitive economy is essential for becoming a prosperous, innovative, and manufacturing nation.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.