New Delhi [India], August 1 (ANI): India's economy is likely to grow around 7 per cent in the first quarter of FY27, higher than earlier expectations, supported by stronger economic indicators, improved industrial activity and a recovery in exports, according to an SBI Research Pre-Monetary Policy Committee (MPC) report released on Saturday.

The report said the growth estimate marks an improvement from the Reserve Bank of India's earlier projections, which were lowered because of geopolitical uncertainties.

'In the last three policies, RBI downgraded Q1 FY27 GDP growth projection from 6.9% to 6.6% due to war in middle east. However, now we believe that situation has changed and Q1 growth print may be much better than anticipated,' SBI Research said in its report. 'Our preliminary estimate indicates that Q1 GDP may clock ~7.0% growth.'

The report attributed the improved outlook to a broad-based pickup in high-frequency indicators during the April-June quarter.

According to the report, domestic passenger vehicle sales grew 24.1 per cent year-on-year in June, electricity demand increased 11.5 per cent, exports rose 15.5 per cent, industrial credit expanded 19.2 per cent and the Index of Industrial Production (IIP) grew 7.3 per cent, indicating stronger economic momentum during the quarter.

SBI Research also noted that the global environment remains uncertain, but India's domestic economy has shown resilience.

'Global economy remains uncertain amidst the West Asia crisis, with diverging trends visible across countries. US economy slowed down unexpectedly in Apr-Jun 2026 quarter. India is showing signs of GDP growth coming above expectations...touching approx. 7% in Apr-Jun quarter,' the report said.

The report said the recovery in monsoon conditions could further support economic activity in the coming months.

It noted that July's surplus rainfall reduced the nationwide rainfall deficit to about 13 per cent, while reservoir levels have returned to normal and kharif sowing is only 4.7 per cent lower than last year's level, pointing to the prospects of a better harvest. 'Kharif sowing (so far) is only 4.7% lower than the 2025 levels indicating better harvest and subsequently minimal/no impact on food inflation going forward,' the report said.

Despite the stronger growth outlook, SBI Research expects the RBI to keep interest rates unchanged at the upcoming MPC meeting, citing elevated inflation risks and external uncertainties. (ANI)