THEBUSINESSBYTES BUREAU

NEW DELHI, AUGUST 17, 2026

India’s economic growth is likely to lose some momentum in the opening quarter of 2026-27, with rating agency ICRA projecting real GDP growth at 7 per cent in April-June, marking a four-quarter low. The moderation comes even as domestic economic activity remains resilient, with industrial output and consumption-related indicators holding firm against a backdrop of elevated commodity prices, geopolitical tensions and persistent cost pressures.

ICRA’s estimate represents a slowdown from the robust 7.8 per cent growth recorded in the March quarter of 2025-26. The agency attributed the moderation largely to a slower pace of expansion in the services sector, even though activity across key parts of the economy continued to show healthy domestic volume growth.

The rating agency expects the industrial sector to expand by 7.7 per cent in the June quarter, while agricultural growth is projected at 4 per cent. Services growth, meanwhile, is estimated at 7.9 per cent, reflecting a moderation from the pace seen in the preceding period.

ICRA Chief Economist Aditi Nayar said high-frequency indicators across the industrial and services sectors painted a healthy picture of domestic volume growth during the quarter, despite concerns over the impact of higher commodity prices triggered by the conflict in West Asia.

 “ICRA projects the real GDP expansion to have eased to 7 per cent in Q1 2026-27 from 7.8 per cent in Q4 2025-26, in line with the Monetary Policy Committee’s growth forecast for the quarter,” Nayar said.

However, the outlook for the broader economy remains clouded by external and domestic risks. ICRA noted that business sentiment among services companies weakened materially during the June quarter, with optimism falling to its lowest level in five years. The deterioration reflects growing concerns over the West Asia crisis as well as continued pressure from rising wage costs.

For the full 2026-27 financial year, ICRA expects real GDP growth to moderate to 6.7 per cent, compared with 7.7 per cent in 2025-26. The projection assumes an average crude oil price of USD 80-85 per barrel during the year.

Nayar cautioned that risks to the growth outlook remain tilted to the downside, particularly if tensions in West Asia persist or monsoon conditions create additional uncertainty for the rural economy and agricultural output.

Despite the expected moderation in real growth, India’s nominal GDP is projected to tell a markedly different story. ICRA expects nominal GDP growth to accelerate sharply to 13 per cent in 2026-27, a four-year high, from 8.9 per cent in 2025-26. The acceleration is expected to be driven partly by a likely hardening of inflation readings.

The latest projection underscores a delicate phase for the Indian economy: growth remains firmly in expansion territory, but the pace is expected to cool as geopolitical shocks, commodity prices, wage pressures and weather-related uncertainties test the resilience of domestic demand.