India’s Economy Holds Strong at 7.8% Growth Despite Global Headwinds

India’s economy started the financial year 2026-27 on a strong footing, with real GDP growing 7.8% in the April-June quarter, beating most expectations despite geopolitical tensions, supply disruptions and elevated energy prices.

The latest growth rate was higher than the 7.1% forecast in a Reuters poll and the Reserve Bank of India’s 7% estimate. However, it was below the revised 8.6% growth recorded in the January-March quarter, pointing to some moderation even as economic activity remained robust. Gross Value Added (GVA), which better reflects underlying economic activity, grew 8.2%.

A key feature of the quarter was the sharp improvement in investment activity. Gross fixed capital formation rose 11.9%, compared with just 5.8% a year earlier. Private investment also grew nearly 12%, suggesting stronger spending on productive capacity. Capital goods production, electrical equipment and machinery-related activity all recorded healthy gains.

Manufacturing grew 9.2%, accelerating from 8.3% in the year-ago quarter, while services remained a major pillar of the economy. Financial, real estate, information technology and professional services expanded 12.1%. Overall, the tertiary sector grew 10%.

Domestic consumption also provided support, with private final consumption expenditure rising 7.1%, up from 6.8% a year earlier. Stronger credit demand added to the momentum, with overall bank credit growth reaching 18.3% at the end of June, its highest level in more than a decade.

Agriculture grew 3.6%, helping sustain rural activity despite a delayed monsoon. Meanwhile, exports also strengthened during the quarter.

The strong performance, however, comes with risks. India remains heavily dependent on imported crude oil, leaving growth vulnerable to prolonged energy-price pressures. The rupee, inflation and global financial conditions could also influence the outlook.

For now, the Q1 figures suggest that strong domestic demand and investment are helping India absorb external shocks, while raising expectations that full-year FY27 growth could remain above 7%.