New Delhi, [India] August 30 (ANI): India's real GDP growth is likely to remain resilient at 7 per cent-7.2 per cent in FY27, supported by buoyant domestic demand and continued government focus on capital expenditure, while nominal GDP growth could reach 12.5 per cent-13 per cent, according to recent report by EY. The firm said economic growth prospects remain relatively strong despite geopolitical uncertainty, elevated crude oil prices and a weaker global trade environment.

The outlook comes against the backdrop of an improvement in industrial activity. EY noted that India's overall Index of Industrial Production (IIP) growth accelerated to a 23-month high of 7.3 per cent in June 2026, taking average industrial growth in the first quarter of FY27 to 5.7 per cent, the highest in eight quarters. Manufacturing output rose 7.8 per cent, with electrical equipment, motor vehicles, textiles and food products among the stronger-performing segments.

However, high-frequency indicators suggest some moderation in momentum. Manufacturing PMI eased to 53.5 in July from 54.2 in June, while services PMI declined to 53.3 from 57.4. Both remained above the 50 mark, indicating continued expansion. EY also highlighted that gross bank credit growth accelerated to a 25-month high of 18.6 per cent in June, suggesting continued financial support to economic activity.

On the fiscal side, EY said government capital expenditure growth recovered sharply to 23.7 per cent in 1QFY27, after contracting 23.3 per cent in the fourth quarter of FY26. At the same time, the fiscal deficit remained contained at 18.2 per cent of the annual budget target. EY said the stronger capex push should support demand and improve real GDP growth prospects.

Inflation remains a key risk. Consumer price inflation stood at 4.4 per cent in July, while wholesale price inflation remained elevated at 9.8 per cent, driven by mineral oils, food articles, metals, chemicals and fuels. EY said the higher WPI inflation could push nominal GDP growth above the government's budgeted 10.04 per cent assumption, potentially supporting revenue receipts and allowing continued capex while maintaining the fiscal deficit target.

External risks remain significant, with EY citing higher energy costs and weaker global demand as constraints on exports. The report noted that India's current account deficit could widen to 1.9 per cent of GDP in FY27, according to OECD projections.

EY nevertheless sees scope to strengthen India's external position through import substitution and greater domestic value addition. A targeted strategy covering 1,272 products could potentially substitute around US$189 billion of imports, while export promotion alongside domestic manufacturing could help reduce supply-side vulnerabilities over the medium term. (ANI)