Mumbai: India’s economy may have expanded by 7 percent in the first quarter of FY27, supported by improving domestic economic conditions despite global geopolitical challenges, according to an SBI Research report.
The estimate is higher than the Reserve Bank of India’s latest projection of 6.6 percent for the April-June quarter. The RBI had lowered its forecast from 6.9 percent over the past three monetary policy reviews, citing uncertainty caused by the conflict in the Middle East.
SBI Research believes the economic environment has improved since then, making a stronger growth print likely.
Inflation Outlook Changes
While economic growth appears stronger, inflation could remain elevated over the coming months.
The report said imported inflation remained under control until April 2026 because higher global crude oil prices were not fully passed on to Indian consumers through petrol and diesel prices.
However, consumer price inflation (CPI) is now expected to remain above 5 percent during the next two quarters. Inflation for Q1 FY27 settled at 3.9 percent, while the full-year FY27 projection stands at 5 percent, which remains within the RBI’s target range.
Monsoon Offers Relief
The southwest monsoon has improved significantly after a weak start.
Although rainfall in June was around 40 percent below normal, strong showers in July reduced the nationwide rainfall deficit to nearly 13 percent.
Most states received favourable rainfall during July, which is a crucial month for kharif sowing. Only a few major food-producing states, including Bihar and Andhra Pradesh, experienced weaker rainfall.
El Niño Remains A Risk
The India Meteorological Department (IMD) expects below-normal rainfall during the second half of the monsoon season between August and September.
The report also noted that El Niño, which began strengthening in mid-June, could continue into 2027. This raises concerns for the upcoming rabi crop season.
Despite these risks, reservoir storage remains close to normal levels, and kharif sowing is only 4.7 percent lower than last year’s level. SBI Research believes this should support agricultural output and limit pressure on food inflation in the near term.