Barclays expects Q1 FY27 GDP growth to remain strong at 7.5%, while Gross Value Added (GVA) growth is projected at 7.7%, despite the overhang of the Middle East conflict. Its estimates are higher than consensus forecasts of 7.3% for GDP growth and 7.4% for GVA growth.
“We expect Q1FY27 to see as solid GDP growth of 7.5% y/y and GVA growth of 7.7% y/y,” Barclays said.
The brokerage noted that high-frequency activity indicators generally recorded stronger year-on-year growth during April-June than in the January-March quarter. Of the 20 indicators tracked by Barclays, only seven recorded slower average growth. Some weakness was seen in petrol, diesel and LPG demand and fertiliser production linked to the Middle East conflict.
Barclays said the impact of the conflict had been “sharp, but short-lived”, affecting specific sectors without denting overall economic activity broadly.
The brokerage expects agriculture and mining growth to weaken, while manufacturing GVA growth is projected to improve. Tertiary-sector activity is expected to remain strong, supported by indicators including passenger traffic, GST collections, bank credit and deposits, and government expenditure.
Barclays also expects GVA growth to exceed GDP growth, with weaker net indirect tax growth potentially pulling headline GDP lower. The revised WPI series will also be important in assessing concerns surrounding the use of different deflators in calculating economic growth.
The Q1 FY27 growth data could have implications for monetary policy. The Reserve Bank of India (RBI) has forecast Q1 FY27 GDP growth at 7%, compared with Barclays’ 7.5% estimate.
“If growth surprises RBI on the higher side materially, this could become an important consideration in monetary policy setting on October 7,” Barclays said.
According to the brokerage, significant growth outperformance, alongside inflation remaining in line, “may tilt the balance of risk to the hawkish side”. This could potentially shift the RBI’s policy undertone from “neutral” to “restrictive” in October.
With MOSPI set to release the Q1 FY27 estimates at 4 pm today, the data will provide a key test of the strength of India’s economic activity against expectations from Barclays and the RBI.
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