India story holds @ 7.8 percent Q1 growth

India continued to press the pedal on its economic growth and posted a figure of 7.8% growth on a year-on-year basis in the first quarter of 2026-27 (Q1 2026-27) compared to 6.9% growth in the same period last year. In terms of Gross Value Added (GVA) growth was even higher at 8.2% compared with 7% during the same period last year.

The services sector was the star of the show and grew at 10%. Manufacturing, electricity, and construction—the secondary sector—was not far behind at 8.6%. Agriculture and mining and quarrying posted a dismal growth of 2.9% compared to 5.3% in the same period last year.

On the expenditure side, Gross Fixed Capital Formation—investment—grew at 11.9%, more than double the rate in the same quarter last year (5.8%). Seen together with the high growth in electricity, gas, water supply and other utility services, this points to strong prospects for growth in the coming quarters. Consumption also showed robust growth at 7.1%, a tad above the 6.8% in the same period a year ago. Strong consumption growth along with higher speed of investment growth shows that the two key engines of growth are humming nicely.

The consumption story is important as India had to face the adverse consequences of the war in West Asia during the period between the last quarter of 2025-26 and Q1 2026-27. The government bore the costs of that external shock. Government Final Consumption Expenditure fell marginally at 4.3% compared to 4.5% in the first quarter of the last year.

These figures stand out against a gloomy global economic scenario where wars and protectionism are eroding the world’s economic prospects. India’s fast growth is mostly due to tighter fiscal and monetary coordination.

The trade-off for the government during the crisis months from March to June was not easy. Not absorbing the fiscal hit would have allowed it to post better deficit figures even as the heavy lifting of managing macroeconomic stability would have fallen on the shoulders of the Reserve Bank of India (RBI), as inflation would have certainly gone up. The risk inherent in this “fiscal soundness” would have been the loss of growth momentum in the Indian economy.

In the fourth quarter of 2025-26, the Indian economy grew at 8.6% and 8.7% in GVA terms. In sequential terms, there has indeed been a slight loss of momentum. But that does not give the correct picture as quarter-on-quarter comparisons do not iron out the seasonal variations and volatility in growth numbers.

As such, the government’s bet has paid off. Growth has remained robust and there is hardly any economy in India’s peer group that is posting this level of growth. There is some noise about the necessity of “reforms” even as these are hardly ever spelled out. India’s strong economic growth is likely to continue for the foreseeable quarters ahead.