GDP growth may moderate to 7.35% in Q2 of FY27: Finance Ministry

India's economic growth is expected to slow to 7.35% in the July-September quarter of FY27, compared to 7.8% in the preceding quarter, amid a moderation in business activity, according to the monthly economic report released by the Union Finance Ministry on Thursday.
The projected GDP growth of 7.35% for the second quarter is based on the Department of Economic Affairs' (DEA) "nowcasting" model, which was introduced in the Economic Survey 2025-26 released in January this year.Nowcasting refers to the use of recently available data to update estimates of key economic indicators that are otherwise published with a considerable time lag.
The Ministry of Statistics and Programme Implementation is scheduled to release the GDP data for the July-September quarter on November 30, 2026. The DEA's growth projection draws on high-frequency indicators such as industrial output, energy consumption, port traffic, GST collections and automobile sales.The report noted that business activity witnessed some moderation during Q2 FY27, although there were indications of a recovery towards the end of the quarter. The manufacturing Purchasing Managers' Index (PMI) eased during the period, reflecting slower growth in new orders, while the Services PMI also recorded a decline.However, both indices remained firmly in the expansionary zone and improved in September, indicating stronger business momentum towards the close of the quarter."The recovery in PMI readings, alongside improved business sentiment, points to a cautiously favourable outlook for the coming months," the report said.
The report also highlighted the resilience of consumption demand during Q2 FY27, supported by growth in automobile sales across segments.Domestic automobile sales increased by around 25% year-on-year, with growth recorded across vehicle categories and in both rural and urban markets. While a favourable base effect contributed to the sharp rise, as consumers had postponed purchases in August-September 2025 ahead of anticipated GST rate cuts, the broad-based growth indicates underlying strength in consumption demand.
"Taken together, these indicators point to sustained growth momentum in Q2 FY27," the report said.However, the Finance Ministry also cautioned that geopolitical developments and possible El Niño conditions could pose risks to the economic outlook."Uncertainties remain considerable. Amidst elevated crude oil prices, higher food inflation and uncertain outlook for the Kharif crop, sustaining economic activity while safeguarding price stability will be the focus of policymakers in the second half of the financial year," it said.

(Business Correspondent)