India’s Second-Half Growth Could Moderate To 5.5–6%, Report Points To Slower Fiscal Spending Following Strong First-Half Push
CLSA sees India’s growth easing to 5.5–6 per cent in H2 FY27 as government capital spending slows, with weak rural conditions and economic uncertainty adding pressure to the outlook.
India’s Second-Half Growth Could Moderate To 5.5–6% |
New Delhi: India’s economic growth could ease to 5.5–6 per cent in the second half of FY27 as government capital spending slows after a strong start to the year, according to a CLSA report.
The forecast compares with expected growth of 7–7.5 per cent in the first half. Weak rural conditions, a higher comparison base and economic uncertainty could also weigh on the pace of expansion.
ALSO READ
Government Capital Spending May Ease
Combined capital expenditure by the Centre and states increased 13.2 per cent during April–August 2026, compared with 20 per cent growth in the same period last year.
CLSA expects this growth to moderate to around 4 per cent during September 2026–March 2027. That would be below the 5 per cent increase recorded in the corresponding period a year earlier.
The report said governments spent more heavily in the early months of FY27, leaving a slower spending pace for the remaining months.
Defence Spending Could Rise
The Centre’s capital expenditure growth is expected to fall below 5 per cent between September and March.
Defence spending could strengthen, but expenditure on roads and railways may remain flat or decline, according to CLSA.
Central capital spending, excluding loans and advances, rose 15.2 per cent in the first five months, showing that investment spending remained relatively strong despite pressure on government finances.
ALSO READ
Fiscal Deficit Adds Pressure
The Centre’s fiscal deficit reached 41.9 per cent of its annual Budget estimate during April–August, the highest proportion for this period in six years.
A sharp drop in August receipts contributed to the deterioration. Total government spending increased 10.5 per cent, against 13.8 per cent a year earlier.
State Spending Growth Also Slows
States’ capital expenditure rose 10.4 per cent during April–August, down from 15.4 per cent last year.
CLSA said weaker receipts and uncertainty could constrain spending. Meeting the Centre’s annual expenditure targets would represent its best-case scenario, while rural conditions remain another key factor.
RECENT STORIES
-
-
-
-
-