India's GDP Grows 7.8% in Q1 FY27, Beating RBI Forecast

India's economy grew 7.8% year-on-year in the first quarter of FY27 (April-June), according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday. The pace matched the previous quarter's 7.8% expansion and accelerated from the 6.9% recorded in the same quarter a year earlier, as per revised figures. The growth rate came in above the Reserve Bank of India's 7% forecast for the quarter and also beat the 7.3% projection in an Economic Times poll and the 7.5% estimate in a CNBC-TV18 poll of economists.

Real GDP stood at ₹81.36 lakh crore in Q1, compared with ₹75.46 lakh crore in Q1 FY26. Nominal GDP grew 10.3% to ₹88.27 lakh crore from ₹80 lakh crore a year earlier.

The expansion was led by the services and secondary sectors. Real gross value added (GVA) grew 8.2%, up from 7.1% in the year-ago period. The tertiary sector expanded 10%, with financial, real estate, IT and professional services growing 12.1%, while trade, hotels, transport and communication services rose 8.5%. The secondary sector grew 8.6%, with manufacturing GVA up 9.2%, electricity, gas, water supply and utility services up 8.9%, and construction up 7.7%.

The primary sector was a relative drag, growing 2.9%. Agriculture and allied activities expanded 3.6%, while mining and quarrying contracted 2.4%.

Investment and Consumption

On the expenditure side, gross fixed capital formation, a proxy for investment, rose 11.9% at constant prices, sharply faster than the 5.8% expansion a year earlier. Private final consumption expenditure grew 7.1%, while exports increased 12% in real terms and imports contracted 1.1%.

The strong investment reading was highlighted by economists. Madhavi Arora, Chief Economist at Emkay Global Financial Services, said the Q1 GDP growth number "validates the cyclical upturn in the economy," reflected in a broad range of high-frequency indicators, including corporate earnings. "This resilience came despite elevated raw-material costs amid the Middle East crisis, suggesting that volumes remain resilient and firms have been able to pass through a meaningful portion of higher input costs," she added.

Nomura economists said in a note on Friday that despite supply shocks and higher commodity prices due to the Iran war, the growth resilience reflects "a troika of factors": limited pass-through of retail fuel prices and low inflation; the government's supply-side management and continued focus on public capex; and de-escalation of trade tensions with the US.

Economists' Views and Outlook

The growth print was broadly above expectations. The State Bank of India had estimated Q1 growth at 8.1%, as reported by CNBC-TV18. Former NITI Aayog Vice Chairman Rajiv Kumar had estimated growth could be around 7.5% or slightly higher, but expected moderation ahead amid global uncertainty and a weak monsoon, projecting full-year growth at 6.8% and cautioning against complacency.

Economists at The Economic Times noted expectations of moderation in Q2 and Q3 of FY27. ICRA's chief economist Aditi Nayar said high frequency indicators revealed a healthy picture of domestic volume growth, while Radhika Rao at DBS Bank said corporate earnings indicators were broadly constructive, and Sakshi Gupta at HDFC Bank said manufacturing activity remained buoyant.

The Financial Express reported the RBI had projected FY27 growth at 7.7%, though The Indian Express cited the RBI's forecast of 7% for 2026-27 as a whole. Nomura recently raised its growth forecast for the current year to 7%, according to The Indian Express.

Fiscal Context

The release came with a caveat about nominal GDP. The Union Budget for 2026-27 assumed India's nominal GDP this fiscal will be Rs 393 lakh crore, showing growth of 10% over MoSPI's first advance estimate of GDP, released in January. However, the statistics ministry has since revised the GDP series, which now has a base of 2022-23. Under the new series, the nominal GDP for 2025-26 is over 3% lower than previously estimated, so meeting the Budget's nominal GDP assumption would require nominal growth of more than 13.5% this year, as The Indian Express reported.

The revised GDP series also incorporates methodological changes, including using the Producer Price Index (PPI) instead of the Wholesale Price Index (WPI) for certain components, as noted by CNBC-TV18.

Risks and Challenges

The growth came against a backdrop of external risks. The RBI flagged uneven monsoon, El Niño conditions, geopolitical tensions and global trade uncertainty as downside risks, The Financial Express reported. Economists also pointed to potential headwinds. Rajiv Kumar warned that fragmented global markets, oil supply uncertainty and the global environment could weigh on investment, and noted that private investment had remained tepid. He suggested stronger domestic demand and export focus could lift growth above 7%.

Alexandra Hermann Prasad at Oxford Economics, cited by The Economic Times, said achieving Prime Minister Modi's aim of making India a developed nation by 2047 would require exceptionally strong acceleration in growth.

The composition of growth, however, suggests a broad-based expansion. As The Financial Express reported, industrial activity and services both remained firm even as global trade uncertainty and the West Asia conflict kept energy and input costs volatile during the quarter.