India’s economy is likely to have grown by about 7.8 per cent in the July to September quarter, according to SBI Research, a figure that would match the pace of the previous quarter and beat the Reserve Bank of India’s estimate. The Q2 FY27 GDP growth estimate of 7.8 per cent sits above the central bank’s projection of 7.2 per cent for the same quarter. SBI Research released the report on Wednesday, 11 November.
Gross value added, which measures output across sectors, is expected to grow between 8 per cent and 8.2 per cent in the quarter, alongside the Q2 FY27 GDP growth estimate of 7.8 per cent. Nominal GDP growth, which includes the effect of inflation, is projected at 11 to 11.5 per cent. The official figures for the quarter will come from the National Statistical Office on 30 November.
What the Q2 FY27 GDP growth estimate says
SBI Research based the estimate on a dynamic factor model that tracks 54 high-frequency indicators across farming, industry and services. The report said 88 per cent of the 50 leading indicators it tracks showed faster growth in the second quarter, against 78 per cent in the same period a year earlier. The Q2 FY27 GDP growth estimate draws on that broad improvement rather than on any single sector.
The Finance Ministry’s own reading is lower. Its October Monthly Economic Review put second-quarter real GDP growth at 7.35 per cent through a nowcasting model, after growth of 7.8 per cent in the April to June quarter. The ministry’s estimate pointed to continued strength in domestic demand, industrial production and consumption, with goods and services tax collections up about 15 per cent in the quarter and domestic car sales up about 25 per cent from a year earlier.
Services lead the Q2 FY27 GDP growth picture
Services are expected to grow 9.7 per cent in the quarter, against 10 per cent in the April to June quarter. The slight easing still leaves services as the largest contributor to growth. Services growth of 9.7 per cent is the largest single piece of the Q2 FY27 GDP growth picture. SBI Research put the gross value added deflator at 4.1 per cent and the GDP deflator at 3.4 per cent. The farm deflator rose to 6.4 per cent, while the services deflator stood at 3.5 per cent.
Manufacturing is likely to grow faster in real terms than in nominal terms because its deflator stayed negative. That quirk means the volume of factory output rose faster than its value in current prices. The report also noted that input costs stayed above output prices across several manufacturing sectors, which means producers have not yet passed the full rise in costs on to buyers through higher selling prices. That mix of volume growth and cost pressure sits inside the Q2 FY27 GDP growth estimate.
Corporate earnings and bank credit
Company results support the Q2 FY27 GDP growth estimate. SBI Research looked at about 2,300 listed companies outside banking, financial services and insurance, and found earnings before interest, taxes, depreciation and amortisation up 35 per cent from a year earlier. Profit after tax at the same companies rose 33 per cent. Strong credit growth also supported bank profits, and public sector banks did better than private banks on asset quality.
The price gap between inputs and outputs was widest in electrical equipment, computer, electronic and optical products, furniture and fabricated metal products. The report said the gap had narrowed from earlier in the year but had not closed. For manufacturers, that leaves margins under pressure even as sales volumes rise.
Weather risks to farm output
Weather is the main risk in the report. SBI Research said the effect of El Nino has shifted from the Kharif season to the Rabi season, and the government expects farm production to fall 11.4 per cent this year. Combined farm production losses could reach about 3.86 crore tonnes, including 0.89 crore tonnes in the Kharif season and 2.97 crore tonnes in the Rabi season. Rajasthan, Punjab, Uttar Pradesh and Maharashtra face the largest Kharif losses, while Madhya Pradesh, Uttar Pradesh and West Bengal face the greatest Rabi risks. Those farm losses are the main threat to the Q2 FY27 GDP growth estimate.
If the official data matches the Q2 FY27 GDP growth estimate, India will have grown 7.8 per cent in both quarters of the financial year so far. The report’s projections suggest the economy kept its pace in the second quarter even as global conditions stayed uncertain. Domestic demand, company earnings and bank credit did the work, while manufacturing cost pressures and weather risks to farm output remain the areas to watch when the official data is released on 30 November.