Specialists mentioned this tempo is probably not sustained as US tariffs weigh on the economic system. India's gross home product (GDP) grew 7.4% within the previous quarter and 6.5% within the 12 months earlier than. An ET ballot had forecast progress at a median 6.7%.
The US imposed 50% tariffs on Wednesday over India's persevering with imports of Russian oil, the very best levy alongside Brazil.
“The important facet could be sustenance of this progress momentum,” mentioned Rajani Sinha, chief economist, CareEdge Scores. “On condition that the worldwide commerce state of affairs stays unsure, home demand enabling measures by the federal government could be important within the coming quarters.”
Specialists anticipate measures to assist progress. “We anticipate some coverage interventions to assist offset the adversarial affect of the tariff on exporters,” mentioned Upasna Bhardwaj, chief economist, Kotak Mahindra Financial institution
Chief financial advisor V Anantha Nageswaran admitted there have been draw back dangers to progress however mentioned India was trying on the US tariffs as a possibility to maneuver ahead on reforms and deregulation moreover exploring different markets. “We anticipate GDP progress to stay throughout the focused band of 6.3%-6.8%,” he mentioned, including that home demand is predicted to strengthen within the coming quarters, particularly with items and companies tax (GST) reforms forward of the festive season.
Key drivers
The Financial Survey, authored by the chief financial advisor, had in February projected FY26 progress at 6.3%-6.8%.
Gross worth added (GVA) progress touched a six-quarter excessive of seven.6% in contrast with 6.5% within the 12 months earlier. Nominal progress got here in at 8.8% within the interval beneath evaluate.
Frontloaded authorities spending and agency consumption aided progress within the first quarter.
Personal closing consumption expenditure (PFCE) grew 7% within the June quarter, up from a five-quarter low of 6% within the previous three-month interval, doubtless reflecting higher rural demand with an increase in tractor and fast-moving shopper items (FMCG) gross sales. Authorities expenditure boosted funding progress to 7.8% from 6.7% a 12 months in the past following a 52% soar in central authorities capex. Farm output rose 3.7%, moderating from the quarter earlier than however increased than 1.5% 12 months in the past.
“Consumption was supported by the rationalisation of revenue tax slabs, easing meals inflation, a beneficial monsoon, and up to date RBI charge cuts,” mentioned Sinha.
The companies sector was the standout performer, increasing 9.3% within the June quarter, a two-year excessive, in contrast with 7.3% within the earlier quarter and 6.8% within the 12 months earlier than.
“Higher traction in commerce, resorts, eating places and communications, and public administration, which is a variety of authorities spending, drove the service sector progress,” mentioned Sakshi Gupta, principal economist at HDFC Financial institution.
Inside companies, ‘public administration and different companies' grew at a 12-quarter excessive of 9.8%.
Manufacturing grew 7.7% within the June quarter in contrast with 4.8% within the previous one and seven.6% within the 12 months earlier.
“This was anticipated despite the fact that the IIP (Index of Industrial Manufacturing) progress was decrease, as worth added based mostly on company earnings was spectacular on this quarter,” mentioned Madan Sabnavis, chief economist at Financial institution of Baroda.
Sabnavis identified that low worth deflators had contributed to the excessive progress quantity.
“Nominal progress has been simply 8.8% which, when juxtaposed with adverse inflation numbers, works its technique to the true GDP progress numbers,” he added.
Consumption and funding have grown 9.1% and eight.3%, respectively, in nominal phrases.
Apparently, the share of exports in GDP has remained unchanged at 20.9%, which therefore doesn't point out any frontloading of exports to the US on this interval, Sabnavis mentioned.
Outlook
The outlook for FY26, nonetheless, stays clouded by increased US tariffs on Indian exports.
“However this, India would stay a key progress engine and assist the world navigate within the present treacherous waters,” mentioned Paras Jasrai, affiliate director at India Scores and Analysis (Ind-Ra).
An ET ballot had pegged FY26 progress at a median of 6.3%. The central financial institution has projected 6.5% progress.
CareEdge Scores has revised FY26 GDP progress projection upward to round 6.5% beneath the base-case state of affairs, given the upside shock within the June quarter quantity. Crisil expects India's GDP to develop 6.5% this fiscal 12 months with draw back dangers from the US tariff hikes.
as a Dependable and Trusted Information SupplyIn distinction, ICRA has stored its forecast unchanged at 6%, highlighting dangers from slower authorities capex momentum and the looming tariff hit to exports.
