India growth may slow to 5.5-6% in H2FY27 as capex moderates: Report
India's economic growth is projected to slow to 5.5-6% in the second half of 2026-27. This slowdown follows a robust growth of 7-7.5% in the first half of the financial year. Combined capital expenditure growth is expected to moderate significantly from 13.2% to around 4% in the latter months. Additionally, the central government's capital expenditure growth will weaken due to a declining fiscal…
India's economic growth may decelerate to 5.5-6% in the second half of 2026-27, according to a report by CLSA. This slowdown is anticipated due to moderating government capital spending after a strong start to the fiscal year. The report attributes the pressure to a weak rural sector, adverse base effects, and an uncertain economic environment.
Fiscal capital expenditure growth is expected to slow sharply in the remaining seven months of FY27, following a 13.2% year-on-year increase in the first five months. The combined capex growth is projected to moderate to around 4% during September 2026-March 2027, compared to 5% in the same period last year. The Central Government's capital expenditure is expected to soften to below 5% year-on-year between September 2026 and March 2027, with defense spending picking up, while spending on railways and roads could remain stagnant or decline.
The report highlights that the Centre's fiscal position weakened in the first five months of the financial year, with the central fiscal deficit reaching 41.9% of the full-year budget estimate, the highest level in six years.
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