India's Q1 GDP Growth: Brokerages Raise FY27 Growth Forecasts, See RBI Rate Hikes — Check Estimates

India's economic growth has held firm despite the West Asia crisis and elevated commodity prices, with the June quarter real GDP growth coming in at 7.8%, beating the market estimate of 7.3%. The print has prompted global brokerages to raise their FY27 growth forecasts and, in some cases, bring RBI rate hikes back into focus.

The June-quarter GDP growth was unchanged from the previous quarter and was supported by a strong performance from manufacturing, investment and exports. Manufacturing grew 9.2%, while power, gas and water supply expanded 8.9% and construction grew 7.7%. Nominal GDP growth, however, was softer at 10.3%.

Bank of America said the economy has shrugged off the oil shock, retaining momentum in the June quarter. It expects FY27 GDP growth to remain above 7%. Citi raised its FY27 real GDP growth forecast by 40 basis points to 7.3%, saying the strong print removes a key obstacle to rate normalisation. 

Kotak Securities raised its FY27 growth estimate to 7.2%, with risks evenly balanced. It highlighted strong exports and investment, although private and government consumption remained relatively tepid. UBS also raised its FY27 forecast, to 6.9% from 6.5%, and brought forward its expectation of 50 bps of rate hikes from FY28 to FY27. 

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Brokerages on GDP

BofA

• Q2CY26 GDP growth was strong at 7.8% YoY, shrugging off the oil shock.
• Expects FY27 GDP growth to remain above 7%.
• Sees the RBI leaning towards a more hawkish stance in October.
• Given revised inflation projections, the real policy rate is expected to turn negative in Q3FY27 and remain so until Q1FY28.
• Retains its call for 50 bps of rate hikes in FY27, starting with the December MPC meeting, supported by the robust growth outlook.

Kotak Securities

• Q1FY27 GDP growth remained resilient despite the West Asia crisis.
• Growth was driven by strong exports and investment, while private and government consumption remained tepid.
• Nominal GDP growth at 10.3% came in below expectations.
• Raises FY27 real GDP growth forecast to 7.2%, with risks evenly balanced.

Citi

• Resilient growth removes an obstacle for rate normalisation.
• Raises FY27 real GDP growth forecast by 40 bps to 7.3%.
• Expects growth to moderate slightly in H2FY27 due to unfavourable base effects, El Niño and the fading impact of last year's policy stimulus.
• Cuts FY27 nominal GDP growth forecast to 11.5% from 12.5% due to a lower-than-expected GDP deflator.
• The Q1FY27 GDP print gives the RBI room to consider a rate hike in October without being overly concerned about sacrificing growth.

UBS

• India's GDP growth remained resilient at 7.8% YoY in the June quarter.
• Revises FY27 growth forecast to 6.9%.
• Growth has held up despite energy and weather-related risks.
• Brings rate hikes back into consideration, shifting its call for a 50 bps hike from FY28 to FY27.
• Investment and net exports drove growth, while consumption softened.
• Manufacturing strengthened and services remained supportive.

Goldman Sachs

• Q2 real GDP growth beat expectations, while past data series were revised higher.
• Raises its CY26 growth forecast.
• Given stronger-than-expected investment growth in Q2, expects some sequential moderation over the next two quarters.
• Central government capex growth is likely to decline after front-loading in the first four months of the fiscal year.

Morgan Stanley

• July fiscal deficit was at a six-month low.
• Remains watchful of weather conditions and their impact on agricultural output and yields.
• Weaker agricultural performance could weigh on revenue collections and require higher food subsidies.
• Renewed geopolitical tensions could keep commodity prices elevated, adding to fiscal expenditure pressures.

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