India's economic growth is estimated to accelerate to 7-7.2 per cent in the first quarter of fiscal 2026-27, compared with 6.8 per cent in the corresponding quarter of the previous financial year, on the back of stronger performance in manufacturing, electricity, construction and services, according to a report by Bank of Baroda.
The estimate comes ahead of the release of provisional GDP figures by the Ministry of Statistics and Programme Implementation. The Bank of Baroda report said economic momentum in the April-June quarter is expected to be stronger than a year earlier, with several key sectors likely to outperform their Q1FY26 growth rates.
The report identified manufacturing, electricity and construction as major drivers of the anticipated acceleration. Continued government capital expenditure, healthy credit and deposit growth and sustained investment activity are expected to support economic expansion during the quarter.
“This will be helped by pickup in growth in manufacturing, electricity and construction sectors which are projected to report higher growth in Q1FY27 vis-a-vis Q1FY26,” the report said.
According to the report, steady improvement in government capital expenditure, coupled with healthy growth in bank credit and deposits, is expected to provide further momentum to the economy. However, the agriculture sector is likely to face pressure from a delayed monsoon and aggravated heatwave conditions during the quarter.
Agriculture growth is estimated at 3.5 per cent in Q1FY27, lower than the 4.4 per cent recorded in the corresponding period of the previous year. The weaker performance is expected to partly offset the stronger expansion projected in industrial and services-related activities.
Industrial growth, meanwhile, is projected at 6.8 per cent. Within the industrial sector, manufacturing is estimated to expand by 7.8 per cent, reflecting continued resilience in production and investment activity. Mining growth is projected at 3 per cent.
Electricity generation is expected to record strong growth of 7 per cent, while construction activity is forecast to expand by 6 per cent. The anticipated performance of these sectors is expected to benefit from infrastructure spending and continued investment in the economy.
The services sector is likely to remain another major contributor to overall GDP growth, with expansion estimated at 8 per cent. Financial, real estate and professional services are expected to be particularly strong, growing by an estimated 9.2 per cent.
The report, however, flagged risks arising from the ongoing West Asia crisis, particularly through its impact on global commodity prices. It noted that the conflict has led to sharp price movements and increased volatility in commodities such as crude oil, fertilisers and natural gas.
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International crude oil and urea prices surged by 44.7 per cent and 73.5 per cent, respectively, during Q1FY27, according to the report. Higher input costs could create pressure for businesses, particularly manufacturers, even as domestic production continues to show resilience.
“Manufacturing sector continues to exhibit resilience even as it faces uncertainty due to the ongoing West Asia crisis along with cost pressure,” the report said, adding that continued capital expenditure and steady investment activity would remain important drivers of overall economic growth.
For the full financial year FY27, Bank of Baroda expects India's economy to expand by 6.6-6.8 per cent. The report expects growth to become increasingly broad-based through the year, supported by relatively stable inflation and currency conditions.
The Q1FY27 outlook therefore points to a stronger start to the fiscal year, with manufacturing, services and infrastructure-related activity expected to offset weakness in agriculture and external risks stemming from elevated commodity prices.
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