India’s April-June quarter GDP number was slower than the revised 8.6% growth in the previous three months.
Gross value added, a measure of economic activity that excludes taxes and subsidies, grew at 8.2% in real terms, up from 7.1% in the corresponding period last fiscal. Meanwhile, Nominal GVA growth stood at 11.5% for Q1 in real terms.
An Economic Times poll had forecast a 7.3% growth rate in the first quarter, higher than the Reserve Bank of India’s projection of 7%.
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Nominal GDP grew 10.3% in Q1, compared with 8.1% a year earlier.
Key primary sectors witnessed moderation during the first quarter. Agricultural growth slowed to 3.6% YoY in Q1 FY27 from 4.4% a year earlier, while the mining sector registered a sharp drag, shrinking 2.4% compared to a stellar 12.4% growth in the corresponding period last fiscal.On the industrial front, manufacturing kept up its solid run, growing 9.2% in Q1 compared to 8.3% a year ago. The electricity sector saw a dramatic turnaround, jumping to 8.9% growth after shrinking 1.8% in the same period last year. Construction also picked up healthy steam, expanding 7.7% against 5.2% last fiscal, giving a solid boost to overall economic activity.
Last year’s Goods and Services Tax (GST) rate cut and income tax reductions likely continued to support household disposable income and demand, helping cushion the impact of rising inflation. But economists expect the recent pickup in private investment to be temporary.
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The stronger performance reinforces the government’s recent pitch to global investors that India can withstand external shocks. The South Asian nation has been particularly exposed to the closure of the Strait of Hormuz, a key route for oil shipments to a country that imports nearly 90% of its crude.
Prime Minister Narendra Modi welcomed the stronger-than-expected GDP numbers, calling the 7.8% growth in the first quarter of FY27 a “herculean feat”. He attributed the performance to the collective strength of Indians and said the economy had remained resilient despite oil price shocks, supply chain disruptions and global uncertainties.
“India’s exemplary GDP growth of 7.8% during Q1 of FY 2026-27 is a herculean feat,” Modi said in a post on X.
“The collective strength of our people ensured India delivered such growth despite oil price shocks and supply chain issues in the midst of global uncertainties.
“Doomsayers were doomed and India bloomed…yet again!” he added.
Key drivers behind India’s GDP growth rate
“Q1 growth came in at 7.8% versus our estimate of 7.5%, led by upbeat domestic consumption, continued support from government spending, investments and healthy export performance,” said Sakshi Gupta, Principal Economist, HDFC Bank.
Input cost pressures due to the West Asia conflict were offset by higher volume growth with sectors like manufacturing and electricity, gas growing by close to 9%. The stand-out sector remained services, with financial, real estate and professional services growing by a high of 12% in the quarter, she said.
“Going forward, we revise our GDP growth estimate for the full year to 7% from 6.8% taking into account the strong Q1 print and with monsoon performance broadly holding up during the Kharif season, limiting the risk for rural demand.”
India’s strong growth “surprised” on the upside for the 12th straight quarter, said Dhiraj Nim, Economist/FX Strategist, ANZ Research.
“Prima facie, growth is led by investments and exports reflecting a balance of domestic and external demand.” This raises upside to FY27 GDP growth forecast of 6.7% and should ease the way for monetary policy normalisation, he stated.
“While encouraging, it remains to be seen if strong growth and a turnaround in the earnings cycle sustains to attract greater portfolio inflows into equities.”
Industrial production grew by an average of 5.7% in Q1FY27, up from 3.8% in the previous quarter. Consumption also remained strong, with domestic passenger vehicle sales growing 25.6% on average in Q1FY27, nearly doubling from a 13.1% rise in Q4FY26. Electricity demand growth improved to 8.4% from 1.9% over the same period.
Investment activity strengthened, with the Centre’s capital expenditure rising 18.6% in Q1FY27, compared with 9.1% in the previous quarter.
Services activity remained buoyant, with the services purchasing managers’ index rising to 58.6 on average in Q1FY27 from 58 in the previous quarter. Services exports also accelerated to 13.1% from 8.9% over the same period.
Strong GDP growth validates the cyclical upturn in the economy, as reflected in a broad range of high-frequency indicators, including corporate earnings, said Madhavi Arora, Chief Economist, Emkay Global Financial Services.
“This resilience came despite elevated raw-material costs amid the Middle East crisis, suggesting that volumes remain resilient and firms have been able to pass through a meaningful portion of higher input costs.”
However, the stronger GVA growth of 8.2% appears to reflect a sharp increase in net public-sector subsidies, which outpaced the growth in net indirect taxes, she further added.
India’s ambition to become developed nation
Even with growth topping 7% last quarter, a pace Bloomberg notes most major economies would “envy”, it may still not be fast enough to realize Prime Minister Narendra Modi’s vision of a developed nation.
PM Modi aims to make India a developed nation by 2047, when the country marks 100 years of independence from British rule. Getting there would require the world’s sixth-largest economy to grow at 9.25% annually for 21 years, according to Ashok Lahiri, a senior official at the country’s apex government-run think-tank.
The ambition of “Viksit Bharat” has become a centerpiece of PM Modi’s third term. However, assuming the current rate of growth, India’s economy would fall short of his vision, according to several economists.
Growth averaged 6.3% between 2000 and 2024, well below the current potential rate of 7.5%-8%. The economy has grown at or above 9.25% just three times over the past 50 years — 1975, 1988 and 2021.
Achieving the target “would require an exceptionally strong and sustained acceleration in growth,” which will “become increasingly difficult as the economy expands and the base becomes larger,” said Alexandra Hermann Prasad, a London-based economist with Oxford Economics.