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India Economic Pulse
India Economic Pulse analyzes high-frequency economic indicators and policy developments to help businesses understand economic trends and the government's policy direction.
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We are pleased to share the September 2026 edition of the EY India Economic Pulse, which examines India's economic performance amid continued geopolitical uncertainty, evolving global financial conditions and shifting trade dynamics. As part of Indian economy analysis, the report highlights resilience in the face of external headwinds, supported by strong domestic consumption in India, robust investment activity, healthy tax collections and sustained policy support. It also assesses developments across growth, inflation, trade, public finances, capital flows, commodity markets, Indian financial markets and key sectoral indicators shaping India's outlook for FY27.
Key highlights from this edition include:
- Growth outlook: India's economy grew by 7.8% in Q1 FY27, supported by broad-based growth in consumption, investment and exports. Gross Value Added (GVA) expanded by 8.2%, driven by strong performance across manufacturing, construction and services sectors. The report notes that India's economic fundamentals remain strong enough to support growth of nearly 7% in FY27.
- Consumption and demand trends: Domestic demand remained buoyant across both rural and urban markets. Consumer credit increased by 16.2%, passenger vehicle registrations increased 25.1%, tractor registrations rose 22.3% and two-wheeler registrations grew 21.4%, reflecting sustained consumer confidence.
- Investment and capital expenditure: Investment activity continues to strengthen, with Gross Fixed Capital Formation growing 12% in Q1 FY27, outpacing GDP growth. Industrial credit growth reached a decadal high of 20%, while cement and steel production increased by 9.9% and 4.6%, respectively, indicating strong momentum in infrastructure and real estate investment.
- External sector dynamics: While gross FDI inflows rose 15% to US$30.7 billion in April-June FY27 and remittances increased significantly, India's merchandise trade deficit widened amid higher imports, particularly in electronics and energy products. The report highlights the importance of strengthening domestic manufacturing capabilities and leveraging recently concluded FTAs to support export growth in India.
- Fiscal and tax performance: Public finances remained resilient despite reductions in fuel-related duties. Gross tax revenues increased by 11.4% during April-July FY27, supported by strong growth in corporate and personal income taxes. Capital expenditure rose by nearly 30%, while the fiscal deficit in India remained lower than for the corresponding period last year, reflecting improved revenue performance and prudent fiscal management.
- Inflation and commodity trends: CPI inflation in India remained contained within the RBI's target range at 4.5% in July 2026, although WPI inflation remained elevated at 9.8% due to higher energy-related input costs. Commodity markets experienced volatility, with crude oil prices rising amid renewed geopolitical tensions and agricultural commodity prices requiring close monitoring for potential food inflation risks.
- Financial markets and external stability: Foreign exchange reserves in India reached a record high of US$729.3 billion, supported by foreign currency non-resident account (FCNR) inflows and improving capital flows. The Rupee stabilized in recent months, while equity markets recovered as FPI sentiment strengthened and domestic institutional investments remained robust.
Going forward, India's economic outlook will depend on the evolution of geopolitical developments, energy market stability, global financial conditions, and the effectiveness of ongoing policy measures aimed at strengthening domestic manufacturing and investment. While external risks remain, India's growth story continues to be supported by resilient domestic demand, a strong investment cycle, accelerating formalization and digitalization of the economy, robust tax collections and sustained public infrastructure spending. Continued policy focus on competitiveness, technology adoption and economic resilience will be critical to sustaining India’s economic growth in FY27 and beyond.
Please find below the complete report for a deeper analysis.
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