India's economy grew at a stronger-than-expected pace of 7.8 per cent in the first quarter of FY 2026-27, showing resilience despite the impact of the West Asia crisis and a challenging global environment, economists said, while cautioning that growth could moderate in the coming quarters.
India's real GDP grew 7.8 per cent in the April-June quarter, surpassing the Reserve Bank of India's earlier estimate of 7 per cent for the quarter. The growth was supported by a broad-based performance, with manufacturing and services also recording strong growth.
Rajani Sinha, Chief Economist, CareEdge Ratings, said the Q1 performance demonstrated the resilience of the domestic economy despite external challenges. "The Indian economy remained resilient in Q1 with GDP growth at a better-than-expected 7.8 per cent, despite a challenging global environment. Moreover, the GVA growth was much higher at 8.2 per cent," Sinha said.
She, however, expects some moderation in the coming quarters, citing geopolitical and domestic risks. "Looking ahead, we expect some growth moderation in the coming quarters. The looming global risks from geopolitical tensions and trade policy uncertainty are expected to weigh on the growth outlook," she said.
Sinha also flagged weather-related risks from El Nino conditions and elevated food inflation as potential challenges to agricultural output and domestic demand. Despite these risks, she said the stronger Q1 performance had led CareEdge to raise its FY27 growth projection to 7.3 per cent from 7 per cent earlier.
Other economists also highlighted the strength of the Q1 growth momentum. Rajni Thakur, Chief Economist, L&T Finance, described the 7.8 per cent growth as a "positive surprise", particularly as the quarter coincided with the peak of the West Asia crisis. "A strong GDP growth rate of 7.8 per cent in the first quarter of FY27, despite it being a quarter of peak West Asia crisis, is a positive surprise," Thakur said.
She pointed to strong manufacturing and services activity, with manufacturing growing 9.2 per cent and services expanding 10 per cent, as signs of broad-based economic growth. "While risks from global uncertainties and El Nino remain on the horizon, strong capex, robust credit growth, and continued policy support should sustain economic activities for the rest of the fiscal year and drive it above the 7 per cent level," Thakur said.
Devendra Pant, Chief Economist at India Ratings & Research, also said the economy had remained resilient despite the West Asia crisis. He noted that aggregate capital expenditure by the Centre, states and central public sector enterprises grew 16.9 per cent in Q1 FY27, compared with 14.1 per cent in FY26. "Going forward, Ind-Ra expects FY27 is likely to cross 7.0% from its estimate of 6.8%," Pant said.
Meanwhile, Madhavi Arora, Chief Economist at Emkay Global Financial Services, said the strong GDP print validated the cyclical upturn in the economy. "Strong GDP growth validates the cyclical upturn in the economy, as reflected in a broad range of high-frequency indicators, including corporate earnings," Arora said.
She added that the resilience came despite elevated raw-material costs during the Middle East crisis, indicating that volumes remained resilient and companies were able to pass on a meaningful portion of higher input costs.
However, economists also flagged that the strong Q1 pace may not continue at the same rate. Rajeev Sharan, Head of Research at Brickwork Ratings, said the growth was supported by a genuine revival in investment but retained a more cautious FY27 outlook. "Real GDP growth of 7.8 per cent in Q1 FY27, against 6.9 per cent a year earlier, is led by a genuine revival in investment," Sharan said. "With a harder base through the second half and softer external demand, we do not expect this pace to be sustained and retain FY27 growth estimate at around 6.7 per cent."
Aditi Nayar, Chief Economist at ICRA, also noted that economic activity remained robust in Q1 despite the West Asia conflict and uneven monsoon conditions. Manufacturing GVA growth accelerated to 9.2 per cent, while services growth remained in double digits for the third consecutive quarter.
Overall, economists said the 7.8 per cent Q1 growth highlighted the resilience of India's domestic economy, but geopolitical tensions, trade policy uncertainty, weather risks and a harder base could moderate growth in the quarters ahead. (ANI)
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