Amid global challenges, the government is prioritizing support for the MSME sector through various EPCLGS schemes. Economists suggest that the government plans to reduce non-essential expenses on the revenue side instead of cutting down on capital expenditures to maintain fiscal stability.
The external scenario indicates a potential slowdown in exports due to the impact of global economic conditions, as highlighted by YES BANK ‘Ecologue’. Industries, particularly MSMEs, may experience a deceleration in growth due to disruptions in the supply chain, especially for sectors reliant on imported inputs like oil and its by-products.
Projections for India’s real GDP in FY27 remain at 6.6%, in line with the RBI’s forecast, but there is a downside risk if the crisis in West Asia persists. In FY26, India’s real GDP grew by 7.7%, with GVA showing a year-on-year growth of 7.9%, compared to 7.1% in FY25.
The nominal GDP for FY26 expanded by 8.9%, slightly lower than the previous year’s 9.7%, attributed to subdued deflator levels resulting from softer inflation. Growth in the production sector was primarily driven by services and manufacturing, with private consumption supporting expenditure, along with a resurgence in gross fixed capital formation.
In Q4, GVA grew by 7.9% year-on-year, while GDP saw a 7.8% year-on-year increase, with services recording a robust 9.9% expansion. Industry growth moderated to 7.4% year-on-year, with manufacturing at 7.3%, influenced by increased input costs due to the West Asia crisis, while agriculture rebounded to 3.6% year-on-year.
On the expenditure front, private consumption softened to 7.1% year-on-year in Q4, but remained steady annually at 7.7%. Investment momentum strengthened, with Gross Fixed Capital Formation (GFCF) growing by 10.8% year-on-year in Q4. Early indicators for the first two months of FY27 suggest a slight slowdown, with estimated GDP growth erosion of 100-110 basis points due to uncertainties surrounding the US-Iran conflict resolution.
