India’s economy grew by 7.8% in the April-to-June quarter of fiscal year 2026, surpassing market expectations of a 6.7% expansion, according to official data. Analysts attribute the strong performance to a combination of favorable statistical factors, including a low GDP deflator of 0.9%—the weakest since March 2019—and accelerated government spending on both revenue and capital projects. Agricultural output and services also contributed significantly to the growth momentum. However, economists caution that this pace may not be sustainable, as external pressures mount from a recent 50% U.S. tariff on certain Indian exports, which could dampen export volumes, affect employment, and reduce private consumption over time. While tax reforms such as GST rate rationalization may provide some buffer, the impact on corporate profits and tax revenues remains a concern, especially with nominal GDP growth staying below 9%. Despite the upbeat print, forecasters maintain cautious outlooks for the remainder of the fiscal year, with full-year growth estimates ranging between 6.0% and 6.5%. Some experts believe targeted policy interventions may be necessary to counterbalance the adverse effects of trade barriers. Overall, while the current data reflects resilience, the trajectory ahead will depend on how effectively India navigates global trade headwinds and sustains domestic demand.
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Instant View: India’s economy grows 7.8% in April-June quarter
Economists polled by Reuters had forecast growth likely cooled to 6.7% in the quarter and said it would continue to slow as a sharp hike in U.S. tariffs threatens Indian exporters and jobs. n nSign up here. n nMADHAVI ARORA, LEAD ECONOMIST, EMKAY GLOBAL, MUMBAI n n”The super healthy GDP growth print in the first quarter has gotten a temporary boost from extremely soft deflator, front-loaded government spending (unlike last year), along with front-loaded exports to the US. Some of these factors will reverse as we move ahead. n n”Besides, the effective macro hit from the 50% tariff imposition will start to feed through exports and have a domino effect on employment, wages and private consumption. This could further dampen private investment outlook and hinder growth, n n”However, on the face of it, softer deflator effect and some consumption buffer from GST cuts could offset the hit in real GDP growth as we move to calendar year 2026.” n nUPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI n n”The sharply higher-than-expected first-quarter GDP data provides a reasonable upside to our earlier full-year estimate of 6.2%. n n”However, we remain fairly cautious on the way ahead amid expected slowdown in exports from higher tariffs along with deferring in production ahead of GST rate cuts. n n”We expect some policy interventions to help offset the adverse impact of the tariff impact on exporters.” n nADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM n n”After the unexpectedly strong first quarter of FY2026, a lower year-over-year momentum of government capex and the looming hit to exports from the U.S. tariff and penalties would dampen growth prints in the coming quarters, notwithstanding the balm offered by GST rationalisation. n n”Amidst continuing uncertainty, we maintain our baseline GDP growth forecast at 6.0% for FY2026. n n”The sharper-than-expected GDP growth print, which represents an acceleration over the previous quarter, has doused any expectations that the tariff-related turmoil could prompt monetary easing in the October 2025 policy review.” n nRADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE n n”A sharp upside surprise in growth numbers belied consensus expectations for a slowdown. This was a product of strong service sector output benefiting from low deflators, coupled with firm farm output, and a jump in revenue as well as capital government spending. n n”A bigger watch factor is the sub-9% nominal GDP growth, which has second derivative impact on tax collections and corporate profit performance. n n”Markets will switch focus to the catalysts for rest of the year, which faces an interplay of tariff-related impact, passage of front-loading of exports, boost from GST rationalisation and government spending trend with an eye on revenues.” n nSACHCHIDANAND SHUKLA, GROUP CHIEF ECONOMIST, LARSEN & TOUBRO, MUMBAI n n”The first-quarter numbers have surprised all. n n”However, the bigger takeaway is that one should not really be carried away by the numbers. n n”This is the ceiling when it comes to growth numbers and it will trend down through the rest of the year.” n nDEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS AND RESEARCH, GURUGRAM n n”Going forward, declining retail inflation, monetary easing and rationalisation of GST rates bodes well for consumption demand. n n”Higher tariff could cause a shadow over economic recovery and will have an impact on FY26 growth.” n nSAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM n n”Broadly, the numbers reflect that growth momentum held up in the first quarter. n n”Going forward, we could see some slowdown in the second quarter due to spillovers from the tariff impact. n n”For now, our full-year GDP growth estimate for FY26 is retained at 6.3%, with a downward bias.” n nKUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU n n”Real GDP skyrocketed, and quite in contrast to what multiple high frequency data indicated, purely because of the GDP deflator printing at 0.9%, the lowest since March 2019.” n nSUJAN HAJRA, CHIEF ECONOMIST AND EXECUTIVE DIRECTOR, ANAND RATHI GROUP, MUMBAI n n”Risks remain, most notably the recent 50% U.S. tariff on Indian exports. Yet, with reforms gaining traction and inflation staying modest, India continues to stand out as the most compelling macro story in a gloomy world.” n n”Growth for the full year is still likely to average around 6.5%, even after factoring in tariff headwinds.” n nMADAN SABNAVIS, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI n n”This growth rate will provide a major cushion to any downside that the economy could witness due to the effect of higher tariff imposition by the U.S. n n”Growth has been spearheaded by a rather broad-based performance which is heartening. n n”The economy… does look poised to clock the growth rate of 6.5% for the year notwithstanding the tariff effects which could affect growth by 0.2-0.4%.”