India’s economic growth trajectory is undergoing a shift, with exports and capital expenditure increasingly supporting economic activity as rural consumption and government spending begin to soften. According to an HSBC growth tracker, the growth momentum observed in September indicates a narrowing of the country’s economic growth drivers.

The second half of FY27 is expected to present a more uneven growth environment than the first half, as persistent inflationary pressures and tightening financial conditions weigh on domestic demand.

Rural consumption is showing signs of moderation, while government expenditure is expected to lose momentum. These developments could create challenges for sectors dependent on domestic consumption and public infrastructure spending.

Exports and capital expenditure are emerging as important contributors to economic resilience. Stronger external demand and continued investment activity could help compensate for the weakening contribution from traditional domestic growth drivers.

However, the sustainability of this growth mix will depend on export performance, investment momentum and the extent to which inflation affects household purchasing power. Tighter financial conditions could also influence borrowing costs and investment decisions.

The changing growth composition highlights the importance of monitoring export-oriented industries and capital-intensive sectors as India navigates an increasingly challenging economic environment during the second half of the fiscal year.