India finance ministry sees FY27 growth at 7.3%, warns of inflation and external risks
India's finance ministry expects the economy to grow 7.3% in the fiscal year ending March 2027, slightly above the central bank's 7.1% forecast issued earlier this month. The ministry's October review says the outlook remains exposed to inflation pressures, currency volatility and weather-related risks to farm output.
Highlights
- India's finance ministry projects FY27 GDP growth at 7.3%, slightly above the Reserve Bank of India's latest projection.
- Foreign exchange reserves reached $721 billion on October 16, sufficient to cover 10.3 months of imports, despite rupee pressure from oil prices and portfolio outflows.
- Review warns of growth risks from El Niño's threat to winter crops, ongoing energy price volatility, and tighter global financial conditions despite strong external buffers.
October review outlines growth and risk outlook
As reported by Reuters, citing India's finance ministry in its October economic review, the government's assessment is based on current data and points to a marginally stronger expansion than the Reserve Bank of India's latest projection.The review says near-term inflation depends on domestic food supply management, global energy price volatility and liquidity conditions. It adds that the impact of the recent rate hike on secondary inflation effects depends on the central bank's active liquidity management.
Currency, reserves and farm risks stay in focus
Pressure on the rupee persists because of oil prices, portfolio outflows and broader global uncertainty, although the ministry says India retains a strong external buffer. Foreign exchange reserves stand at $721 billion as of October 16, enough to cover 10.3 months of imports.The review says recent RBI steps to provide dollars to state-run oil companies and curb currency speculation may help limit exchange-rate volatility and imported inflation. It also warns that intensifying El Niño poses downside risks to growth by threatening soil moisture ahead of the winter sowing season, while persistent geopolitical tensions, energy price volatility and tighter global financial conditions remain key risks even as India is described as well-positioned to sustain its expansionary trajectory.
In our earlier article on the RBI’s rupee-defence operations, we explained that the central bank had deployed an estimated $75–$80 billion via spot dollar sales and dollar-rupee swaps from a special FX toolkit introduced in June, contributing to a decline in reserves. We also noted that elevated oil prices, higher U.S. yields and ongoing foreign equity outflows were intensifying pressure on the currency, prompting measures such as a special dollar window for oil companies and steps aimed at reducing dollar demand.
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