India's Q2 GDP growth likely to hit 7.8%, beating RBI estimate: SBI

India's economy is expected to grow at around 7.8% in the July-September quarter of FY27, outperforming the Reserve Bank of India's (RBI) estimate of 7.2%, despite global uncertainties and emerging agricultural headwinds, according to SBI Research.

The report said the country's growth momentum remained robust, with leading economic indicators pointing to sustained expansion. SBI Research's Dynamic Factor Model, which tracks 54 high-frequency indicators across agriculture, industry and services, estimates gross value added (GVA) growth at 8-8.2% in Q2FY27.

Nominal GDP growth is projected at 11-11.5%, supported by an acceleration in the overall price level. The GVA deflator is estimated at 4.1%, while the GDP deflator is pegged at 3.4%.

Manufacturing faces margin pressure from incomplete cost pass-through

Manufacturing activity remains resilient, although producers across several sectors continue to face pressure from elevated input costs. SBI Research noted that the manufacturing deflator remained negative, implying that real manufacturing GDP growth could exceed nominal growth.

Despite some moderation in input-output price differentials, input prices continue to remain higher than output prices across several manufacturing segments, indicating incomplete pass-through of cost pressures. The gap is particularly pronounced in electrical equipment, computers, electronic and optical products, furniture, and fabricated metal products.

Meanwhile, India's listed corporate sector reported strong performance in Q2FY27. Earnings before interest, taxes, depreciation and amortisation (EBITDA) and profit after tax (PAT) of around 2,300 listed companies, excluding banking, financial services and insurance (BFSI), grew 35% and 33%, respectively, compared with the year-ago quarter.

Banks also reported healthy profits amid strong credit growth, with public sector banks outperforming their private counterparts on asset quality.

El Niño threatens agricultural output, but impact remains contained

SBI Research said the impact of El Niño has shifted from the Kharif to the Rabi season, with the government expecting an 11.4% decline in agricultural production this year.

Its assessment estimates potential combined agricultural production losses at around 3.86 crore tonnes, comprising 89 lakh tonnes during the Kharif season and 2.97 crore tonnes during the Rabi season.

The district-level assessment indicates that potential losses are geographically dispersed. During the Kharif season, the highest exposure is concentrated in districts across Rajasthan, Punjab, Uttar Pradesh and Maharashtra. For the Rabi season, Madhya Pradesh, Uttar Pradesh and West Bengal are among the states facing greater exposure.

However, SBI Research said the impact of rainfall deficiency remained limited to specific pockets. It also estimated that the potential impact of El Niño on credit could be around 2.8%.

Agricultural inflation supports nominal growth

Despite the possibility of some moderation in real agricultural GDP growth, nominal growth is expected to remain relatively higher because of rising agricultural output prices.

Agricultural output price inflation accelerated to 8.5% in September 2026, compared with 7.3% in August and 4.8% in May. On a quarterly basis, inflation averaged around 7.8% in Q2FY27, significantly higher than 4.95% in Q1FY27. The agricultural deflator rose sharply to 6.4% during the September quarter, while the services deflator stood at 3.5%.

SBI Research expects India's nominal GDP growth to remain in the 11-11.5% range in Q2FY27, supported by the acceleration in price levels even as agricultural output faces weather-related challenges.