India’s economy expanded at an annual rate of 7.8 per cent in the April–June quarter, outpacing expectations and driven by strong performance in the manufacturing, construction and services sectors. Manufacturing grew 7.7 per cent, services 9.3 per cent, and construction 7.6 per cent, according to official data.
The figure for the first quarter of fiscal year 2026 was higher than the 6.7 per cent growth projected in a Reuters poll. However, economists flagged early signs of moderation. Nominal gross domestic product (GDP), which does not adjust for inflation, slowed to 8.8 per cent compared with 10.8 per cent in the previous quarter, reported CNBC.
“Nominal GDP growth is lower than previous quarters but because the deflator is so soft that the real GDP looks extremely strong,” said Anubhuti Sahay, head of Indian economic research at Standard Chartered. The GDP deflator reflects the effect of inflation on overall output.
Outlook and risks
India faces headwinds after the United States imposed 50 per cent tariffs on Indian imports from Wednesday. The Indian rupee slipped to record lows on Friday, breaching 88 per dollar, amid concerns over growth and weaker portfolio flows.
Even so, Joe Maher, assistant economist at Capital Economics, noted, “The surprise acceleration in India’s GDP growth in Q2 means that the economy is still on course to expand by a world-beating 7 per cent this year, despite the upcoming hit from punitive US tariffs.”
The Reserve Bank of India cut its policy rate to 5.5 per cent in June to support growth, with further easing possible if the slowdown deepens.
