India’s economy expanded 7.8% in the first quarter of fiscal 2026-27, surpassing both last year’s revised 6.9% growth and economist expectations. The strong April-June performance came despite pressure from the West Asia conflict on crude oil prices, supply chains, and global commodity markets.
Manufacturing and Services Drive GDP Growth
Domestic consumption, government capital expenditure, manufacturing, and the services sector provided the biggest support. The central government’s capital expenditure surged 18.6% in Q1, up sharply from 9.1% in the previous quarter. Manufacturing grew 9.2%, exceeding last year’s 8.3% expansion.
Electricity and Construction Sectors Rebound Strongly
The electricity sector posted a sharp turnaround with 8.9% growth, compared to a 1.8% contraction a year ago. Construction grew 7.7%, up from 5.2% in the same quarter last year. Industrial production averaged 5.7% in Q1, better than the previous quarter’s 3.8%. Passenger vehicle sales rose an average 25.6% during the quarter, signaling robust domestic demand.
Agriculture Slows While Mining Contracts
Not all sectors performed well. Agriculture growth slowed to 3.6% from 4.4% last year. Mining contracted 2.4%, a sharp reversal from 12.4% growth a year ago. However, financial, real estate, and professional services grew nearly 12%. Services exports accelerated to 13.1% from 8.9% in the previous quarter.
PM Modi Hails ‘Herculean Feat’ as Outlook Remains Cautious
Prime Minister Narendra Modi described the GDP data as an “exemplary” performance and a “Herculean Feat.” He said, “Doomsayers were doomed and India bloomed…yet again!” Economists warn of possible slowdown in Q2 and Q3. India imports over 85% of its crude oil needs. If prices stay above USD 90 per barrel, inflation and production costs could rise. India aims to become a developed nation by 2047, which will require sustained high growth rates.
