India’s macroeconomic foundations are demonstrating strong structural resilience against intensifying external pressures, with real GDP growth projected to settle between 7.0% and 7.2% for FY27.
According to the latest August 2026 EY India Economy Watch, the robust outlook is anchored by an aggressive fiscal frontloading of central capital expenditure, which surged by 23.7% during the first quarter of FY27 (1QFY27).
This state-led investment cycle has effectively cushioned the domestic economy from a deepening external imbalance. Driven by high global energy costs, the merchandise trade deficit widened to a six-month high of $32.0 billion in July 2026, pushing the Indian rupee to an average low of INR 95.8/US$.
Concurrently, the OECD has projected India’s annual current account deficit (CAD) to deteriorate to 1.9% of GDP for the fiscal year.
However, corporate and industrial balance sheets continue to exhibit substantial financial momentum. Gross bank credit growth accelerated to a 25-month high of 18.6% in June 2026, led by an unprecedented expansion in industrial credit, which grew at its fastest pace since November 2012 at 19.2%. Furthermore, the Index of Industrial Production (IIP) surged to a 23-month high of 7.3% during the same period, confirming a sharp turnaround from the industrial contractions observed in previous quarters.
D.K. Srivastava, Chief Policy Advisor at EY India, noted, “The share of just one commodity group — petroleum crude and products — is currently 22.4% of total imports indicating commodity concentration… on the other hand, within non-oil imports, which accounts for the balance of 77.6%, there is considerable concentration of the source countries dominated by China. These commodities require import substitution as well as source diversification.”