Resilient Q1 Growth Driven by Demand and Government Capital Expenditure Amid Global Challenges
India’s economy is projected to grow between 7% and 7.5% in the April-June quarter of FY2026-27, despite challenges from a late southwest monsoon and geopolitical tensions in West Asia. This growth is supported by strong consumer spending, government capital expenditure, and robust performance in manufacturing and construction sectors. Economists note that this growth rate is slightly lower than the 7.8% recorded in the previous quarter but higher than the 6.8% from the same period last year. The Reserve Bank of India (RBI) has estimated a growth rate of 7% for the June quarter.
The National Statistical Office (NSO) is set to release the official GDP data for Q1 on Monday. Economists anticipate a slowdown in growth in subsequent quarters due to a high base effect and renewed tensions in the Iran-US conflict, which may impact energy prices and corporate profit margins.
HDFC Bank’s principal economist, Sakshi Gupta, forecasts a Q1 growth rate of 7.5%, with nominal growth exceeding 13%. She attributes this to strong industrial growth driven by manufacturing and electricity, alongside sustained consumer spending due to income tax and GST rate cuts. Gupta noted that while higher input costs have pressured profit margins, increased sales volumes in sectors like auto and consumer durables have helped offset these challenges.
DBS Bank’s senior economist, Radhika Rao, indicated that high-frequency indicators suggest the economy has managed geopolitical disruptions better than expected, achieving a growth rate of 7.5%. She observed that industrial activity has accelerated, although demand for industrial fuels remains subdued following price adjustments. Conversely, Bank of Baroda’s chief economist, Madan Sabnavis, has moderated growth expectations to 7% due to the delayed monsoon and lower reservoir levels, which are likely to impact agricultural growth, projected at 3.5%.
ICRA Ratings’ chief economist, Aditi Nayar, also expects growth to cool to 7%, citing a slowdown in profit growth among non-financial companies compared to the previous quarter, particularly due to significant losses in the oil sector. She added that the gross value added in the services sector is anticipated to have decelerated across all sub-sectors.
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