The domestic volume data, as per high frequency indicators, across the industrial and services sectors turned out to be quite healthy in Q1 FY2027, belying the concerns of a fallout of higher commodity prices in the quarter on account of the West Asia conflict. However, the profit growth of a large group of non-finance companies slowed in Q1 FY2027 vis-à-vis Q4 FY2026, amid sizeable losses experienced by oil refining companies. Consequently, ICRA projects the real GVA expansion (base: 2022-23) to ease to 7.2% in Q1 FY2027 from 7.9% in Q4 FY2026. Amid likely compression in net indirect taxes on products, ICRA pegs the expansion in GDP at 7.0% in Q1 FY2027, ~0.2 pp lower than aforesaid GVA growth, and in line with the Monetary Policy Committee’s (MPC) growth forecast for the quarter. At present, ICRA has retained its FY2027 GDP growth forecast at 6.7%, assuming an average crude oil price of 80-85$/bbl for the fiscal, with weak monsoons and prolonged geopolitical conflict posing downside risks.

EXHIBIT: Annual trends in GDP growth (YoY; %) at constant 2022-23 and current prices

PE: Provisional Estimate; FRE: First Revised Estimate; P: Projected; Source: NSO, CEIC, ICRA Research