India's GDP Growth Likely To Ease To 7% In Q1 FY27, Four-Quarter Low: ICRA

New Delhi, Aug 18 (KNN) India's real GDP growth is likely to moderate to 7 percent in the June quarter of FY27 from 7.8 percent in Q4 FY26, marking a four-quarter low, amid headwinds from the West Asia conflict and monsoon-related uncertainty, according to ICRA.

Services Sector Likely to Drive Slowdown

ICRA expects services to drive the slowdown, with GVA growth projected to fall to 7.9 percent in Q1 FY27 from 9.9 percent in Q4 FY26. Industrial GVA growth is estimated to rise to 7.7 percent from 7.3 percent, while agriculture, forestry and fishing growth is projected to increase to 4 percent from 3.6 percent.

Overall GVA growth is expected at 7.2 percent, down from 7.9 percent. ICRA said domestic activity remained healthy, but West Asia-related losses at oil refiners could weigh on growth.

Services growth slowed across major sub-sectors, with 18 of 19 indicators moderating in the first two months of FY27. Business sentiment also fell to a five-year low amid geopolitical uncertainty and persistent wage pressures.

Industrial GVA Growth Expected to Strengthen

Industrial GVA growth is estimated to rise to 7.7 percent in Q1 FY27, supported by most sub-sectors. Manufacturing growth increased to 6.3 percent from 4.7 percent, its fastest pace in six quarters, aided partly by a favourable base.

Computers, electronics, electrical equipment, machinery and motor vehicles recorded stronger growth, while basic metals, refined petroleum products and chemicals faced pressure from West Asia-related disruptions.

Manufacturing Profitability Under Pressure

Despite stronger volumes, aggregate profits of 978 manufacturing companies declined in Q1 FY27 after rising in the previous quarter, largely due to higher raw material costs and losses incurred by oil refiners.

ICRA consequently expects manufacturing GVA growth to moderate to around 6 percent from 7.3 percent in Q4 FY26.

Agriculture Growth Faces Monsoon Risks

Agriculture, forestry and fishing GVA growth is projected at 4 percent in Q1 FY27.

However, the agency cautioned that uneven monsoon distribution could affect agricultural activity in subsequent quarters.

RBI Raises FY27 Growth Forecast

The Reserve Bank of India, in its August policy review, raised its FY27 GDP growth projection to 6.7 percent from 6.6 percent earlier.

It retained its Q3 and Q4 projections at 6.5 percent and 6.8 percent, respectively, while raising its Q1 estimate to 7 percent.

FY27 Growth Seen at 6.7 percent

ICRA expects real GDP growth to moderate to 6.7 percent in FY27 from 7.7 percent in FY26, assuming average crude oil prices of USD 80-85 per barrel. Risks remain tilted to the downside due to West Asia tensions and monsoon uncertainty.

Nominal GDP growth, however, is projected to rise to nearly 13 percent from 8.9 percent, supported by higher inflation.

(KNN Bureau)