1. 7.8% GDP growth in April-June quarter as per data released by the Ministry of Statistics and Program Implementation outperformed the forecast of 6.5% as predicted by RBI few weeks ago, marking a five-quarter high for GDP.
2. Nominal GDP growth also impressed at 8.8%, though less than the prediction of 10.1%, influenced by low inflation and a negative Wholesale Price Index (WPI) for two months.
3. While highlighting that the data outperformed expectations across all parameters, experts did admit that surprises emerged in specific sectors.
4. Many of them predicted the full year GDP growth rate in 6-6.5% range mainly due to the effect of the 50% tariffs being imposed by US government.
5. It was noted that agriculture growth at 3.7% was lower than anticipated in spite of strong Rabi crop performance. Conversely, manufacturing growth at 7.7% exceeded estimates of 5.3%, despite not fully aligning with indicators like the Index of Industrial Production (IIP).

India’s economy kicked off the fiscal year with a robust 7.8% GDP growth in the first quarter (April-June), surpassing market expectations and signaling strong economic momentum. The figure, released by the Ministry of Statistics and Program Implementation outperformed the forecast of 6.5% as predicted by RBI few weeks ago, marking a five-quarter high for GDP and a six-quarter high for Gross Value Added (GVA) at 7.6%. The stellar growth was driven by strong contributions from government spending—both capital and revenue expenditure—and a resilient services sector. Notably, the GVA, which excludes indirect taxes and subsidies, stood at 7.6%, dispelling concerns of inflated figures due to tax distortions. Nominal GDP growth also impressed at 8.8%, though less than the prediction of 10.1%, influenced by low inflation and a negative Wholesale Price Index (WPI) for two months. Economists and banking experts expressed optimism tempered with caution. While highlighting that the data outperformed expectations across all parameters, they did admit that surprises emerged in specific sectors.

It was noted that agriculture growth, at 3.7%, was lower than anticipated, especially given a favorable base and strong Rabi crop performance. Conversely, manufacturing growth at 7.7% far exceeded estimates of 5.3%, despite not fully aligning with high-frequency indicators like the Index of Industrial Production (IIP). A top executive of a private bank stated that quarterly numbers were prone to revisions, but these figures showed that economic activity held up strongly and estimated full-year GDP growth at 6.3% due to potential tariff-related challenges in the second half. Another senior functionary of a credit rating agency highlighted robust expenditure-side growth, with personal consumption, government consumption and gross fixed capital formation growing satisfactorily at over 7%. However, he flagged discrepancies between high-frequency indicators and the GDP figures, particularly in private consumption, which has hovered between 6-8% despite concerns about uneven urban demand. He retained full-year GD

A stock market analyst pointed out that exports, expected to drive growth due to frontloading ahead of anticipated tariffs, grew at a modest 6.3%. This suggests potential for stronger export performance in Q2, though concerns remain about Micro, Small, and Medium Enterprises (MSMEs) facing tariff pressures. He also maintained a full-year forecast at 6.3%, acknowledging upside potential but citing tariff uncertainties. A top official of an MNC investment banking firm emphasized the domestic economy’s strength, with services, real estate and financial sectors growing in the range of 8.5-9.5% She noted that while global trade faces uncertainty, India’s strong Q1 performance—over 1% above consensus—positions it strong enough to face challenges.

The strong nominal GDP growth of 8.8%—against a budgeted 10.1%—provides fiscal leeway for the government. Experts estimate the government could still spend up to another Rs 50,000 crores, allowing for either higher capital expenditure or targeted support for exporters facing U.S. tariffs. They referenced challenges in export-heavy regions like Tirupur (textiles) and Surat (gems and jewellery). The robust growth also reduces the likelihood of an imminent rate cut from the Reserve Bank of India (RBI), which had projected a 6.5% GDP growth for the year. While rate cut expectations were already low, the RBI’s forward-looking stance would depend on Q2 data, particularly the impact of 50% tariffs on MSMEs and exporters.

Despite the strong Q1 performance, experts cautioned that tariff impacts, expected to materialize in the second half, could temper growth. Heavy rainfall and weaker agricultural output in Q2 may also pose challenges, though healthy reservoir levels bode well for the Rabi crop in H2. The GST Council’s upcoming discussions on rationalization and state-level support for manufacturers will be critical.