According to the recent research report of brokerage firms ‘Dolat Capital’ and ‘ICICI Global Markets’, India’s GDP growth is expected to slow down to around 6.5 percent in the financial year 2027. The reasons for this could be increase in input costs, geopolitical tension and weak monsoon. The danger here is not in the availability of supply, but in the burden of landed cost of crude oil and inflation falling on consumers.
Dolat estimates that if IMD’s 90 per cent LPA monsoon forecast due to El Nino holds true, then agriculture GVA growth may slow to 1.2 per cent (YoY) in FY 2027, while weak demand in the Middle East may impact exports. ICICI has cited weak exports, rising input costs and possible disruptions from El Nino as the main challenges, although growth from private consumption and capex (capital expenditure) should remain above 6 per cent.
2026 figures were better
The end of financial year 2026 was better than expected. Real GDP growth in the fourth quarter of the financial year was 7.8 percent (YoY), which was much better than Dolat’s estimate of 6.9 percent and consensus estimate of 7.3 percent. GDP growth for the full year was 7.7 percent (YoY) and GVA growth was 7.9 percent (YoY) – the highest in the new series. Nominal GDP growth was seen at 9.1 percent (YoY) in the fourth quarter and 8.9 percent for FY 2026.
Due to GST reforms, income tax cut of Rs 1 trillion, reduction in inflation and strong demand in rural areas, real private final consumption expenditure increased to 7.7 percent in FY 2026, which was seen at 5.8 percent in FY 2025. Due to higher spending on government infrastructure and private capex, GFCF increased to 8.2 percent as compared to 6.4 percent last year. Investment remained strong at 10.8 percent in the fourth quarter, while private and rural consumption also remained healthy.
Boom was also seen in service and travel sectors
On the supply front, the services sector led with 9.3% (YoY) growth in FY26. Travel and logistics led trade, transport, hotel and communication sectors with a sharp recovery of 11.0% (YoY). Financial, Real Estate and Professional Services remained stable at 10.4% (YoY). Manufacturing improved by 10.7% year-on-year, although Dolat says secondary sector GVA declined from 9.8% in Q3 to 7.4% in Q4, reflecting disruptions in industrial inputs and energy supplies. Agriculture GVA increased from 1.7 percent in Q3 to 3.6 percent in Q4 due to a good harvest, but Dolat expects it to decline if the monsoon is below average.
There is a lot of challenge ahead
Dolat says that the impact of the West Asia conflict was probably less visible in Q4 because companies used inventory. Now the big challenge is to change the route of import of crude oil and bear the higher landed cost. ICICI says that export growth slowed slightly to 6.3% in FY26, while imports increased by 5.6% due to increased domestic demand and imports of capital goods. The 7.7% growth for FY26 gives policymakers a strong starting base for FY27, but growth will be more cost dependent rather than supply. Consumption and capex should remain supportive, but inflation and monsoon risks mean FY27 is likely to be slower than end-FY26.
