GDP expands 7.8 percent as private capex reaches ₹3.2 lakh crore

The Indian economy expanded by 7.8 percent in the first quarter of 2026-27 despite global geopolitical tensions and energy market volatility.

High-frequency indicators showed sustained domestic momentum through August.

Headline inflation rose to 4.8 percent in August, driven by higher food and beverage prices alongside increases in fuel and core components.

Strong export growth helped narrow the merchandise trade deficit, while foreign direct investment and foreign currency non-resident deposit inflows pushed foreign exchange reserves to an all-time high.

Concurrently, private corporate investment plans strengthened, with pipeline capital expenditure for 2026-27 estimated at ₹3.2 lakh crore, led by power and infrastructure projects.

A bulletin study examines the bank credit-deposit (CD) ratio, which rose above 80 percent as lending outpaced deposit growth since FY2023. The authors argue that bank lending creates deposits simultaneously, meaning deposits do not act as a binding prior constraint on credit creation.

Therefore, the CD ratio alone is an inadequate indicator of structural funding vulnerability.

Indian banks sustained the elevated March 2026 ratio through liability adjustments, including lower-cost borrowings, increased capital and the redeployment of reserve balances.