The Indian economy is projected to grow at a rate of 7.7 per cent year-on-year in the third quarter (Q3) of the current financial year, 2026-27. Meanwhile, the Gross Value Added (GVA) growth rate is expected to reach 8.1 per cent. These projections were made in a report released on Thursday by Bank of America (BofA) Global Research.
The report maintains the GDP growth forecast for India for the financial year 2026-27 at 7.4 per cent, while also noting the possibility of a slight upward revision. Furthermore, the economy is projected to grow at a rate of 7.5 per cent in the financial year 2027-28.
According to the report, the Indian economy has maintained strong momentum despite challenges such as the impact of ongoing disruptions in West Asia on global supply chains, an uneven monsoon, and subdued activity in the agricultural sector.
The economy is expected to be supported by a pickup in industrial and manufacturing activities, alongside sustained growth in domestic demand and credit.
Projected 12 per cent growth in manufacturing
The BofA report suggests that robust industrial activity could drive growth of approximately 12 per cent in the manufacturing sector. The Index of Industrial Production (IIP) growth is projected to rise to 7.3 per cent in the third quarter, up from 6.2 per cent in the second quarter.
Additionally, indicators such as vehicle sales, electricity demand, and freight activity remain strong. Bank credit growth continues at around 20 per cent, providing further support to economic activity.
The report notes that GDP growth for the first half of the financial year 2026-27 is estimated to average 7.7 per cent—a figure slightly lower than the 8.1 per cent growth recorded in the second half of the financial year 2025-26. Highest Nominal GDP Growth Projected in Four Years
According to a report, the nominal GDP growth rate for the second quarter of the 2026-27 fiscal year is projected to be around 13.9 per cent on an annual basis. This could mark the highest level of nominal GDP growth seen in approximately four years.
BofA (Bank of America) stated that the momentum of economic growth is expected to persist into the next fiscal year. Consequently, the GDP growth projection of 7.5 per cent for the 2027-28 fiscal year has been maintained.
Oil Prices and Geopolitical Tensions Pose Challenges
The report notes that while the growth momentum of the Indian economy appears robust, there are risks to economic activity, primarily stemming from global conditions.
Although crude oil prices have softened recently, uncertainty regarding the geopolitical landscape remains. Should oil prices stay at elevated levels through 2027, the risks to economic growth could intensify.
Furthermore, factors such as high crude oil prices, geopolitical uncertainty, potential weakness in the rural economy—possibly exacerbated by the effects of El Niño—and further interest rate hikes by the Reserve Bank of India (RBI) could pose challenges to the growth rate.
