India’s GDP maintains growth momentum at 7.8% in Q1, exceeding economists' expectations

India’s economic growth engine maintained its momentum in the April-June quarter of FY27, registering a growth of 7.8%, negating any impact of the conflict in West Asia, late onset of the southwest monsoon and uncertain tariff policies, according to official data released on Monday.

"Real GDP or GDP at constant prices in Q1 of FY 2026-27 is estimated at ₹81.36 lakh crore, against ₹75.46 lakh crore in Q1 of FY 2025-26, showing a growth rate of 7.8%," the ministry of statistics and programme implementation said in a statement.

The figure exceeded projections made by economists. GDP growth was estimated at 7.4% in a Mint poll of 21 economists. Though the economists agreed that growth likely slowed to a four-quarter low, the slowdown was likely to be less intense than previously expected, signalling resilience in domestic demand.

Growth was slower than 8.6% in Q4 of FY26 (revised from 7.8% earlier) but higher than 6.8% in the corresponding quarter of the previous financial year. In its latest monetary policy review earlier in August, the Reserve Bank of India pegged growth in the June quarter at 7% (from an earlier projection of 6.6%) while raising its FY27 growth projections to 6.7% from 6.6% earlier.

“This marks the fourth consecutive quarter of near-potential growth rate for the Indian economy, and momentum into the second quarter of FY27 remains very strong," said Rajni Thakur, chief economist at L&T Finance. "Despite some seasonal softening in the primary sector, 9.2% growth in the manufacturing sector and 10% growth in the services sector bode well for a broad-based growth thrust in the economy.”

Resilient performance

Chief economic adviser V. Anantha Nageswaran said growth was supported by manufacturing, services, exports, private consumption and investment despite global uncertainties and the West Asia conflict.

“What we are witnessing is continued resilience in Indian economic performance. I think that’s the key message here,” Nageswaran said from the US. “Despite the West Asia crisis and uncertainties, the first quarter has held up quite well, partly because of the ground efforts to make sure that input provisions were not affected by the crisis.”

Nageswaran said the GDP estimates were also corroborated by high-frequency indicators such as GST collections and bank credit. He highlighted strong automobile sales in both rural and urban markets as another indication of buoyant underlying demand.

“The near-term domestic economic momentum is very strong, but globally we are continuing to see uncertainties,” he said.

He added that India’s strong domestic momentum and export performance had combined to deliver another quarter of strong growth, which demonstrated the benefits of the macroeconomic and structural reforms undertaken over the past 12 years.

GVA growth

Nominal GDP witnessed growth of 10.3% in Q1 against 8.1% during Q1 of FY26. Real and nominal gross value added (GVA) have been assessed to grow by 8.2% and 11.5%, respectively, in Q1.

“Tertiary sector has boosted the performance of the economy by registering growth of 10% at constant prices, mainly driven by the Financial, Real Estate, IT and Professional Services' sector which has observed 12.1% growth,” the ministry said.

The secondary sector registered growth of 8.6% at constant prices. The primary sector grew 2.9% at constant prices, mainly contributed by the performance of Agriculture and Allied sector, which registered 3.6% growth during Q1.

On the expenditure-side, gross fixed capital formation (GFCF) recorded double-digit growth (11.9%) at constant prices against 5.8% in Q1 of FY26. Private final consumption expenditure (PFCE) registered growth of 7.1% at constant prices during the quarter compared to 6.8% a year earlier.

Saurabh Garg, secretary in the ministry of statistics and programme implementation, said the important point is that the overall GDP numbers remain strong. As in the first quarter, growth has been driven by both the services and secondary sectors.

"But one factor that augurs particularly well for the future is gross fixed capital formation, which grew by nearly 12% in the first quarter. This signals a very healthy trend going forward, as it indicates that capital investment in the economy remains strong,” Garg said.

The ministry of finance, in a report in July, anticipated that despite the uncertain global environment, the Indian economy sustained its growth momentum during the first quarter of FY27, supported by resilient domestic demand. It, however, said some high-frequency indicators such as e-way bill and manufacturing PMI witnessed some softening in momentum. But the service sector strengthened in Q1 of F27, driven by supportive domestic and external demand conditions.

GDP growth projections

The Asian Development Bank pegged India’s growth at 6.6% in the current fiscal compared with 6.9% estimated earlier. The World Bank expects India’s GDP growth at 6.6% this fiscal year.

India's retail inflation, which inched to a 19-month high of 4.45% in July, is a matter of concern. Looking ahead, economists are actively monitoring volatile global energy costs on account of the West Asia conflict and potential weather disruptions that could push inflation higher.

Though inflation still remains within the RBI’s tolerance level, a further rise in prices could push the central bank to increase policy rates that could suppress growth in the coming quarters. In its August policy, the RBI revised its inflation projection to 5% (from 5.1% earlier) but said the twin risks arising from an expected below-normal monsoon amid El Niño conditions and elevated energy prices may keep prices high.

Nageswaran said the impact of the West Asia conflict on oil prices had so far remained more muted than initially feared. However, he cautioned that prolonged disruptions could pose risks to global demand.

“By and large, the oil price impact of the conflict has remained muted than what one would have expected, thankfully so from the Indian perspective,” he said.

He noted that the more important risks could emerge from higher prices of petroleum products, including diesel and natural gas, which could affect consumption in Europe and the US and consequently weaken global demand.

According to data from the National Statistics Office, growth rates in Q1 were estimated at 7.7% in the construction sector, 7.5% in public administration, defence and other services, and 12.1% in financial, real estate and professional services. The manufacturing sector recorded growth of 9.2%, while electricity, gas, water supply and other utilities grew 8.9%.

Government spending fell 4.3% in the three months through June compared to a revised expansion of 4.5% in the previous quarter, the data showed.

“Estimated growth of real GDP in Q1 of FY 2026–27 is 7.8%. Nominal GDP in Q1 of FY 2026–27 is estimated to have grown by 10.3%, while Real GVA has recorded growth of 8.2%. The credit for this strong performance goes to the people of India and their hard work. Reforms undertaken by the NDA Government, together with an agile management of the economy, are bearing results. The NDA Government, led by PM Shri @narendramodi, remains committed to further expanding economic opportunities for all our citizens,” finance minister Nirmala Sitharaman said in a post on X.