India’s economy demonstrated strong growth in the first fiscal quarter ending in June 2026, expanding by 7.8%, surpassing market expectations of 7.1%. This performance matched the growth rate of the previous quarter and was largely fueled by robust activity in the financial, real estate, information technology, and professional services sectors. Although agriculture showed slower progress, both manufacturing and services sectors significantly improved, contributing to the overall positive economic momentum.

According to India’s Ministry of Statistics and Program Implementation, the surge in manufacturing, services, automobile sales, and loan growth helped sustain this growth trajectory. Barclays’ India chief economist, Aastha Gudwani, noted that despite geopolitical tensions such as the Iran war, India’s consumer demand remained strong, with most key economic indicators showing resilience compared to earlier quarters. This resilience indicates steady domestic demand supporting the country’s economic expansion.

The Reserve Bank of India (RBI), while acknowledging the economy’s resilience amid global uncertainties, forecasts a moderation in growth. In August, the RBI projected a 7% GDP growth for the quarter ending June 2026, and a slowdown to 6.7% for the entire 2026-27 fiscal year. Factors such as elevated energy prices, supply chain pressures, and potential disruptions from El Niño-induced monsoon variability pose risks to the agricultural sector and rural market demand.

Despite challenges, including inflation rising to 4.45% in July due to high energy costs, the RBI chose not to raise interest rates in its August policy review, a contrast to other Asian central banks. The cautious stance reflects the bank’s balancing act amid persistent inflationary pressures and the need to support economic growth in a complex and uncertain global environment.