Economy can sustain high-growth trajectory in FY27, recent GST reforms to help: Finmin review

Finmin Retains Q2 Growth Forecast At 7.35%

The finance ministry's Department of Economic Affairs, in its October monthly review, said the Indian economy could stay on its expansionary path for the remainder of FY27. It retained its nowcasting estimate of 7.35% real GDP growth for the September quarter, the same figure it projected in September. Official Q2 data is due in late November. The review follows upward revisions by global agencies, with the IMF raising India's FY27 forecast by 60 basis points to 7%, and the World Bank, OECD and RBI projecting 7.1%. First-quarter growth had come in at 7.8%.

GST Process Reforms To Ease Compliance

The review singled out recent GST process reforms as supportive of business activity, saying they would reduce compliance and working capital burdens. The GST Council this month agreed to widen and speed up refunds, limit officers' powers to arrest those suspected of evasion, and bring greater certainty to routine compliance. High-frequency indicators, including industrial output, energy use, port traffic, GST collections and auto sales, were stronger in the September quarter than in the preceding one. The review also pointed to healthy credit growth and recent trade agreements as likely to support consumption, investment and exports.

Inflation And Policy Risks To Watch

The review flagged considerable global uncertainty, including elevated oil prices and inflation. Domestic headline retail inflation rose 71 basis points to a 23-month high of 5.54% in September on costlier food and fuel, though about 64% of the CPI basket remains below the RBI's 4% midpoint. The RBI raised the repo rate by 25 basis points this month and shifted its stance from neutral to calibrated tightening. Downside risks include an intensifying El Niño affecting rabi sowing and festive demand pressure, while higher crude prices and maritime freight disruptions have lifted input costs. Supply-side steps such as onion releases, sugar stockholding limits and edi…