Archive · 2 Oct 2026
India Growth May Slow as Government Spending Moderates
A report says India’s economy may grow more slowly later in the financial year.
Growth could be 5.5–6% in the second half of FY27.
This would be lower than the expected 7–7.5% growth in the first half.
One reason is that the government spent a lot on building projects early in the year.
It may spend less during the remaining months.
Spending by both the national and state governments has already grown more slowly than last year.
Defence spending may increase, but road and railway spending could stay flat or fall.
Weak rural conditions and uncertainty could also make growth slower.
CLSA forecasts India’s growth could ease to 5.5–6% in the second half of FY27.
The projection compares with expected growth of 7–7.5% in the first half.
Combined central and state capital spending rose 13.2% during April–August 2026, down from 20% a year earlier.
CLSA expects capital-spending growth to moderate to about 4% from September 2026 through March 2027.
Weak rural conditions, higher base effects, fiscal pressure and uncertainty could weigh on economic expansion.
- Who
- India’s central and state governments, as assessed by CLSA.
- What
- India’s economic growth may moderate to 5.5–6% in the second half of FY27 as capital-spending growth slows.
- When
- The forecast covers the second half of FY27, from September 2026 through March 2027, following data from April–August 2026.
- Where
- India.
- Why
- Government capital spending may slow after a strong first-half push, while weak rural conditions, a higher comparison base, fiscal pressure and uncertainty may weigh on growth.
- Growth forecast, first half of FY27
- 7–7.5%
- Growth forecast, second half of FY27
- 5.5–6%
- Combined capital-spending growth, April–August 2026
- 13.2%, compared with 20% in the same period a year earlier
- Expected capital-spending growth, September 2026–March 2027
- Around 4%
- Central capital-expenditure growth, first five months
- 15.2%, excluding loans and advances
- Fiscal deficit, April–August
- 41.9% of the annual Budget estimate
- State capital-expenditure growth, April–August 2026
- 10.4%, down from 15.4% a year earlier