India's Q1 GDP Growth At 7.8%, Highest In Five Quarters

India's gross domestic product growth came in at 7.8% in the April-June period, according to the latest estimates released by the government's statistical office on Friday. This is the sharpest GDP growth in the last five quarters and significantly higher than estimates.

In the fourth quarter of the last financial year, the GDP had grown by 7.4%, whereas the same stood at 6.5% in the first quarter of fiscal 2025.

The GDP was estimated to grow by 6.7% during the quarter under review, according to economists polled by Bloomberg.

GVA, excluding indirect tax and subsidies, rose 7.6% during the April-June period, compared to the estimate of 6.8% in the preceding quarter and 6.5% in the year-ago period. The GVA is considered a better metric for growth as it is not impacted by fluctuations in indirect tax collections and subsidy expenditure.

The GDP growth performance in Q1FY26 has been very impressive and higher than forecast, said Madan Sabnavis, chief economist at Bank of Baroda.

This growth has been spearheaded by a rather broad-based performance, which is heartening, he said, adding that it would provide a major cushion to any downside that the economy could witness due to the effect of higher tariff imposition by the USA.

The low price deflators have contributed to this high growth number to an extent as GDP is reckoned at current prices and then scaled down based on these deflators, Sabnavis explained. Nominal growth has been just 8.8% which when juxtaposed with negative inflation numbers works its way to the real GDP growth numbers.

• Agriculture grew 3.7% in Q1FY26, compared to 5.4% in Q4FY25

• Mining fell -3.1% as against a rise of 2.5% in the previous quarter

• Manufacturing expanded 7.7% as against 4.8% in the preceding quarter.

• Electricity and other public utilities increased 0.5% versus 5.4% in Q4

• Construction rose 7.6% in Q1FY26 as compared to 10.8% in Q4

• Trade, hotel, transport, and communication expanded 8.6 as compared with 6% in the previous quarter.

• Financial services sector rose 9.5% as against 7.8% in Q4.

• The public administration segment increased 9.8% as compared to 8.7% in Q4.

• Private final consumption expenditure rose by 7% versus 6% in Q4

• Government final consumption expenditure rose by 7.4% vs a contraction of 1.8% in Q4.

• Gross fixed capital formation rose by 7.8% vs 9.4%.

The outlook for private consumption is bolstered by developments like income tax relief, 100-bps rate cut, healthy progress of kharif sowing and upcoming rationalisation of GST slabs, even as discretionary purchases by households could be deferred in Q2, until tax cuts are implemented during the festive season, according to Aditi Nayar, chief economist at ICRA.

However, after the unexpectedly strong Q1FY26, a lower YoY momentum of government capex and the looming hit to exports from the US tariff and penalties, would dampen growth prints in the coming quarters, notwithstanding the balm offered by GST rationalisation, she added, retaining her forecast at 6% for the full fiscal year.