The Indian economy began FY27 on a firm footing, even as the global environment grew more uncertain, and the growth momentum has extended into Q2, though at a more measured pace, the Finance Ministry’s ‘Monthly Economic Review’ for September showed on Thursday.

“Our nowcasting measure, unveiled in the Economic Survey earlier this year, anticipates a real GDP growth rate of 7.3 per cent in the fiscal second quarter,” it said.

The conflict in West Asia disrupted energy markets and trade routes, testing economies across the world. Against this backdrop, India's real GDP grew by 7.8 per cent in the first quarter, the highest first-quarter growth in the current series.

“The expansion was broad-based, with manufacturing, construction and services all gaining strength. Domestic demand remained supportive, while investment emerged as an increasingly important driver of growth, with the investment rate reaching its highest level in the current series,” the Review noted.

Timely government measures to secure energy supplies and critical inputs, together with the limited pass-through of global energy prices to domestic fuel prices, helped insulate domestic activity from the external shock, it added.

It further said that E-way bill generation and the manufacturing PMI have grown more slowly, while services activity firmed in August, driven by stronger new business and employment. Electricity and fuel consumption continue to register healthy growth, and bank credit has sustained its strong expansion.

Industrial sector performance remained firm in Q1 FY27, with real Industry GVA growth of 7.7 per cent year-on-year, led by 9.2 per cent growth in Manufacturing. More recent high-frequency indicators also point to continued expansion, although with some moderation: IIP grew by 6.7 per cent year-on-year in July, while the Index of Core Industries grew by 4.8 per cent and the Manufacturing PMI stood at 52.8 in August.

Bank credit to industry also accelerated in July, with growth broad-based across enterprise-size categories. Sector-specific indicators remained supportive, while recent policy measures continued to deepen domestic capabilities across electronics and semiconductor value chains.

Domestic price pressures intensified across the retail, wholesale, and producer levels due to renewed global oil market pressures and weather-related volatility. Despite these pressures, the overall inflation landscape remains predominantly anchored, with a majority of the basket (69 per cent of items) continuing to record inflation well below the 4 per cent target.

“At the current run rate of nearly USD 400 billion in the first five months of the year, India’s overall export value for the full financial year could approach a trillion US dollar. That is a very strong confirmation that India’s trade agreements are providing impetus to India’s exports,” said the Review.