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* EAI-GVA growth improved in Sep’26, supported by a recovery in services activity. Preliminary estimates indicate that EAIGVA growth increased to 6.9% YoY in Sep’26 from 6.4% YoY in Aug’26, led by a recovery in services growth to 7.0% YoY from 5.4% YoY. Industrial activity remained resilient, although growth moderated to 9.3% YoY from 10.2% YoY, while agricultural activity slowed to 0.1% YoY from 1.5% YoY. Non-farm EAI-GVA growth also improved to 7.7% YoY in Sep’26 from 7.0% YoY in Aug’26. At the quarterly level, however, EAI-GVA growth moderated to 7.5% YoY in 2QFY27 from 8.4% YoY in 1QFY27.

* EAI-GDP growth accelerated, supported by a stronger contribution from net exports. EAI-GDP growth increased to 14.7% YoY in Sep’26 from 13.0% YoY in Aug’26. Consumption growth moderated to 9.7% YoY from 12.3% YoY, while investment growth eased to 9.4% YoY from 12.7% YoY. However, external demand provided a stronger boost, as real exports grew 19.4% YoY in Sep’26, while real imports growth slowed sharply to 4.8% YoY. Consequently, the contribution of net exports improved to 4.0pp in Sep’26 from 2.0pp in Aug’26.

* High-frequency indicators point to some moderation in economic activity in Oct’26. Domestic demand indicators softened, with PV sales growth easing to 16.8% YoY in Oct’26 from 23.8% YoY in Sep’26, while CV sales growth moderated to 24.5% YoY from 38.7% YoY. Registered motor vehicle sales also contracted 23.9% YoY after growing 33.3% YoY in Sep’26. Manufacturing PMI moderated marginally to 54.7 in Oct’26 from 55.1 in Sep’26, while Services PMI improved to 55.8 from 55.2, with both remaining in expansionary territory. Reservoir levels remained below the year-ago level, while FX reserves moderated to USD719.7b from USD747.6b but continued to provide a strong external cushion.

* Growth outlook remains firm, but some moderation is likely in 2HFY27: Our EAI-GVA suggests that economic activity remained resilient in 2QFY27, with EAI-GVA growth averaging 7.0% YoY during Jul-Sep'26, albeit moderating from 7.8% in 1QFY27. In 1HFY27, EAI-GVA growth averaged 7.4%. Strong investment and consumption, healthy manufacturing and services activity, robust credit growth, and sustained government infrastructure spending continue to underpin domestic activity. However, tighter financial conditions, elevated inflation, and a less supportive global environment are likely to result in some moderation in 2HFY27. We retain our FY27 real GDP growth forecast at 7.2%, above the RBI's 7.1% forecast. We peg nominal GDP growth at around 13.5% in FY27.

* EAI-GVA growth improved, led by services: EAI-GVA growth improved to 6.9% YoY in Sep’26 from 6.4% YoY in Aug’26, supported by a recovery in services activity, while industrial and agricultural growth moderated. Non-farm EAI-GVA growth also strengthened to 7.7% YoY in Sep’26 from 7.0% YoY in Aug’26, indicating an improvement in underlying non-farm activity. Industrial growth moderated to 9.3% YoY in Sep’26 from 10.2% YoY in Aug’26, while agricultural activity slowed sharply to 0.1% YoY from 1.5% YoY. In contrast, services growth recovered to 7.0% YoY in Sep’26 from 5.4% YoY in Aug’26, providing the key support to overall EAI-GVA growth. (Exhibits 1 and 2).

* EAI-GVA growth moderated in 2QFY27: EAI-GVA growth moderated to 7.5% YoY in 2QFY27 from 8.4% YoY in 1QFY27, although it remained higher than 5.5% YoY in 2QFY26. Non-farm EAI-GVA growth also eased to 8.4% YoY in 2QFY27 from 9.0% YoY in 1QFY27, but remained significantly above 5.4% YoY in 2QFY26. The moderation reflected slower growth across all three sectors. Agricultural growth declined to 2.2% YoY in 2QFY27 from 3.2% YoY in 1QFY27, while industrial growth eased marginally to 8.1% YoY from 8.2% YoY. Services growth moderated to 8.7% YoY from 9.3% YoY. Within industry, manufacturing and electricity remained resilient, but construction and mining activity weakened. In services, stronger fiscal spending and telecom activity provided some support, although trade credit, MF AUMs, and real deposits recorded a sharp moderation. (Exhibit 10).

* EAI-GDP growth accelerated, supported by a stronger contribution from net exports: EAI-GDP growth accelerated to 14.7% YoY in Sep’26 from 13.0% YoY in Aug’26, led by higher contribution of net exports. EAI consumption growth moderated to 9.7% YoY in Sep’26 from 12.3% YoY in Aug’26, while EAI investment growth eased to 9.4% YoY from 12.7% YoY. On the external front, real exports growth moderated to 19.4% YoY in Sep’26 from 25.2% YoY in Aug’26. However, real import growth slowed sharply to 4.8% YoY from 13.2% YoY, leading to an improvement in the net exports contribution to 4.0pp in Sep’26 from 2.0pp in Aug’26 (Exhibits 3 and 4).

Components of EAI-GVA

* Agriculture remains weak: Agricultural activity slowed sharply to 0.1% YoY in Sep’26 from 1.5% YoY in Aug’26, reflecting weakness in farm-related indicators. Domestic tractor sales contracted 15.5% YoY in Sep’26, compared with growth of 8.3% YoY in Aug’26, indicating a loss of momentum in rural demand. Fertilizer production remained weak, contracting 11.7% YoY in Sep’26, although the pace of contraction narrowed from 12.4% YoY in Aug’26. Reservoir levels also remained below the year-ago level, with the contraction widening marginally to 19.3% YoY in Sep’26 from 18.4% YoY in Aug’26 (Exhibits 8 and 9).

* Industrial activity moderated but remained strong: Industrial activity moderated to 9.3% YoY in Sep’26 from 10.2% YoY in Aug’26, as growth in manufacturing, electricity, and construction eased. Manufacturing growth moderated to 10.6% YoY in Sep’26 from 11.7% YoY in Aug’26. Electricity generation remained strong at 11.4% YoY in Sep’26, although it moderated from 13.1% YoY in Aug’26. Construction growth also eased to 7.2% YoY from 8.0% YoY. Credit growth softened marginally to 7.2% YoY in Sep’26 from 7.6% YoY in Aug’26. However, mining activity showed signs of recovery, with the contraction narrowing to 0.6% YoY in Sep’26 from 4.1% YoY in Aug’26. Coal production rebounded to 10.7% YoY in Sep’26 after contracting 3.8% YoY in Aug’26, while crude oil production recorded a smaller contraction of 1.4% YoY compared with 3.6% YoY (Exhibits 5 and 9).

* Services growth rebounded, led by trade and transport: Services growth recovered to 7.0% YoY in Sep’26 from 5.4% YoY in Aug’26, emerging as the key support to overall EAI-GVA growth. Freight traffic growth accelerated to 8.5% YoY in Sep’26 from 6.4% YoY in Aug’26, while trade credit growth strengthened to 11.3% YoY from 9.2% YoY. Auto sales growth remained unchanged at 15.8% YoY in Sep’26, while telecom subscriber growth improved marginally to 10.8% YoY from 10.6% YoY. Real deposits growth also edged up to 7.2% YoY from 7.0% YoY. However, some indicators remained weak. MF AUMs contracted 1.9% YoY in Sep’26, following growth of 5.4% YoY in Aug’26, while fiscal spending contracted 14.7% YoY, deeper than the 10.9% contraction recorded in Aug’26. The services PMI component also remained in contraction, although the pace of decline moderated to 9.4% YoY in Sep’26 from 14.0% YoY in Aug’26. Overall, the recovery in services was led by stronger freight activity, trade credit, and deposits, while weakness in fiscal spending and MF AUMs remained a drag (Exhibits 6 and 9).

Outlook

Growth outlook remains firm, but some moderation is likely in 2HFY27: Our EAIGVA suggests that economic activity remained resilient in 2QFY27, with EAI-GVA growth averaging 7.0% YoY during Jul-Sep'26, albeit moderating from 7.8% in 1QFY27. In 1HFY27, EAI-GVA growth averaged 7.4%. Strong investment and consumption, healthy manufacturing and services activity, robust credit growth, and sustained government infrastructure spending continue to underpin domestic activity. However, tighter financial conditions, elevated inflation, and a less supportive global environment are likely to result in some moderation in 2HFY27. We retain our FY27 real GDP growth forecast at 7.2%, above the RBI's 7.1% forecast. We peg nominal GDP growth at around 13.5% in FY27.

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