Introduction

India’s economy grew 7.8% year-on-year in the first quarter of FY2026-27, surpassing expectations and the central bank’s forecast for 7% growth. The data, released on Monday by the Ministry of Statistics and Programme Implementation (MoSPI), also showed strong expansion in gross value added (GVA), which tracks the value generated across different sectors of the economy.

Strong Performance Amid Global Uncertainty

“The Indian economy has sustained growth momentum despite global headwinds,” the ministry said. The robust growth came despite the first full quarter of the US-Iran war, which had been expected to dent activity. However, the pace slowed by 80 basis points from the 8.6% growth recorded in the March 2026 quarter.

Sectoral and Regional Drivers

Government data showed that capital expenditure grew 23.7% year-on-year during the quarter, backed by higher spending on infrastructure and social sectors. Services, particularly trade, hotels, and transport, remained resilient, while manufacturing output rose 7.8% year-on-year in June, supporting industrial expansion.

Outlook and RBI Projections

While the RBI has projected 7% growth for the first half of the financial year, it expects full-year growth to slow to 6.7%. The central bank’s projections for the coming quarters are 6.4% (Q2), 6.5% (Q3), and 6.8% (Q4) — indicating a moderating trend from the higher first-quarter print.