India’s Apr-June GDP At One-Year High Mark Of 7.8%, Beats Estimates Despite US Tariffs Concerns

India remained one of the fastest-growing economies during April-June quarter of financial year 2025-26, after it unexpectedly achieved a 7.8% year-on-year gross domestic product (GDP) growth rate during the period. India's Q1FY26 GDP stood at a one-year-high mark, supported by robust expansion in the tertiary and agricultural sector.

India GDP data, released by the National Statistics Office on Friday, shows that the Indian economy performed beyond experts' expectations during the quarter. Many also feared the potential impact of the US tariffs uncertainty. The US imposed 50% tariffs on Indian items came into effect on Wednesday, August 27.

Hours after the release of India GDP data, Chief Economic Advisor V Anantha Nageswaran said that he is not expecting significant downside risks to GDP growth due to high US tariffs, reported PTI.

India's real GDP is estimated to grow by 7.8% in the first quarter of financial year 2-25-26 over the growth of 6.5% during the first quarter of FY25. India's nominal GDP growth rate stood at 8.8% in the April-June quarter, according to Press Information Bureau (PIB) press release.

India Q1GDP FY26: Sector-Wise Growth In The Quarter

The spurt in India's GDP growth rate is driven by growth in tertiary, agriculture, and secondary sector activities. The agriculture and allied sectors have observed the real GVA growth rate of 3.7%, as compared to growth rate of 1.5% showcased in Q1FY25. Growth in secondary sectors, including manufacturing and construction stood at 7.7% and 7.6%. Mining and quarrying witnessed a contraction of3.1% during the quarter.

Tertiary Sector Growth In Q1FY26

Tertiary sector made a remarkable growth at a rate of 9.3% during the June quarter against the growth rate of 6.8% in the Q1 of FY25. Other favourable factors for India's strong GDP growth rate were revival of government final consumption expenditure, and gross fixed capital formation. SBI Research had forecasted a Q1 GDP growth rate of 7%.
India's Q1 GDP numbers have surpassed the estimates, highlighted Jyoti Prakash, Managing Partner, Equity and PMS at AlphaaMoney.

"The low GDP deflator ensured a poor nominal GDP growth rate and is likely to make the job of MPC a little more difficult to justify rate cuts," noted Jyoti Prakash.

US Tariffs Concerns

India's GDP growth rate may be impacted by the recently imposed 50% US tariffs on the country. Several experts have raised concerns about the potential impact of tariffs on Indian economy.

However, the recent GDP numbers have brought optimism among economists.
"The data underscores India's ability to sustain high growth even amid global volatility. Robust domestic demand, rising investment activity, and policy-driven momentum have cushioned downside risks. While weak mining output and tariff-related trade risks remain watch factors, the overall trajectory suggests India is on course to remain the fastest-growing major economy in FY26," noted Harshal Dasani, Business Head of INVasset.

"The outlook for private consumption is bolstered by developments like income tax relief, 100-bps rate cut, healthy progress of kharif sowing, and upcoming rationalisation of GST slabs, even as discretionary purchases by households could be deferred in Q2, until tax cuts are implemented during the festive season. Moreover, potential job losses in sectors affected by US tariffs could sour sentiment for some households," noted Aditi Nayar, Chief Economist, ICRA.

Nayar also highlights that strong GDP growth rate with a lower YoY momentum of government capex would dampen the growth sentiment in coming months. The looming hit to exports from the US tariffs and penalties, would also impact the GDP growth rate in coming quarters, despite the GST rationalisation boost. "Amidst continuing uncertainty, we maintain our baseline GDP growth forecast at 6.0% for FY2026," Nayar added.