India’s Economy Grows 7.8% in First Quarter, Beating Reuters Forecast of 7.1%
Key Facts
India’s real gross domestic product grew 7.8% year over year in the first quarter of fiscal year 2026-2027, from April to June, according to an estimate published by the Ministry of Statistics on August 31. The reading was above Reuters’ poll forecast of 7.1% for the same period. The official data thus contradict the account in the initial draft of 5% growth and a sharp slowdown, recording a reading above expectations. The ministry said real GDP reached 81.36 trillion rupees, compared with 75.46 trillion rupees in the corresponding quarter of the previous fiscal year. Reuters quoted the government as saying the economy grew at a similar pace in the previous quarter, placing the first-quarter reading within a path of strong, sustained growth.
Demand components showed improvement in investment, household spending and exports compared with the corresponding quarter a year earlier. Gross fixed capital formation rose 11.9% in the first quarter of fiscal year 2026-2027, versus 5.8% in the same period of the previous year. Household spending increased 7.1%, compared with 6.8%, according to data from India’s Press Information Bureau, citing the Ministry of Statistics. Exports also accelerated, growing 12.0% after 6.0% in the corresponding quarter. These figures present a different picture from earlier claims of weak consumption and investment, with household spending and investment growing faster than their comparable levels.
In the latest available activity indicators for October, the preliminary composite business activity index rose to 56.7 points from 55.9 in September, marking the fastest expansion since June, according to HSBC data cited by Moneycontrol. The improvement was driven by manufacturing and services, with companies reporting better market conditions and an increase in new orders, particularly from overseas markets. The preliminary services activity index climbed to 56.2 points from 55.2 in September. By contrast, the preliminary manufacturing purchasing managers’ index fell to 54.9 points from 55.1. The divergence between the two indexes indicates that October’s improvement in activity was more pronounced in services, while manufacturing remained in expansion territory even as its reading declined from the previous month.
August industrial production data provide an additional baseline for tracking activity ahead of the next reading. The industrial production index grew 8.0% year over year in August, up from 6.7% in July on a provisional estimate, according to India’s Ministry of Statistics. Manufacturing growth of 9.0% in August supported the index, alongside a 12.3% increase in electricity and gas supply. These figures show a broader industrial improvement in August compared with the previous month. The government is scheduled to release September industrial production index data on October 28, adding a more recent reading to the tracking of producer-sector performance.
For the annual outlook, the Indian Economic Survey estimated real GDP growth in fiscal year 2026-2027 at 6.8% to 7.2%, with potential growth estimated at about 7%. These annual estimates compare with the first-quarter reading of 7.8%; they are not a forecast for the quarter alone. The next key date is the release of September industrial production data, scheduled for October 28. Second-quarter GDP estimates, covering July to September, are scheduled for publication on November 30, 2026. That quarterly reading will provide an update on the growth trajectory after the first quarter.