India's Q2 FY27 GDP Growth Projected At 7.3%, But Geopolitical Risks Loom

India's economy is projected to grow 7.3% in the second quarter of FY27, according to the Finance Ministry's nowcasting model released in its September Monthly Economic Review. However, the ministry cautioned that economic momentum has slowed compared to the first quarter's 7.8% growth, with e-way bill generation and manufacturing activity showing moderation.

The outlook faces headwinds from geopolitical tensions, trade uncertainties, and a US bill enabling tariffs up to 100% on countries purchasing Russian crude oil. The ministry also flagged challenges for India and other developing economies in attracting capital amid a global AI investment boom favoring developed nations. Nevertheless, net FDI increased to $13.4 billion during April-July 2026 from $9.7 billion a year earlier, with expectations for improved performance in FY27.

Inflation risks stem from climate conditions, crude oil prices, and tightening monetary policies. Services activity improved in August with stronger new business and employment, offering some bright spots in the economic outlook.