India GDP yo

Economic growth ebbs less than expected in April–June

GDP growth slows less than expected: India's GDP increased 7.8% in annual terms in April–June, down from 8.6% in the previous quarter but comfortably beating market expectations.

Export surge helps offset slowdown in consumer and government spending: Compared to the previous period's data, readings in April–June softened for private consumption (+7.1% in annual terms vs +7.5% in January–March), government consumption (+4.3% vs +7.7% in January–March) and imports of goods and services (-1.1% vs +0.8% in January–March). In contrast, readings strengthened for fixed investment (+11.9% vs +10.5% in January–March) and exports of goods and services (+12.0% vs +3.9% in January–March). Private consumption lost further steam as inflation continued to pick up and consumer sentiment wilted further due to the Iran energy shock, and public expenditure also decelerated after the government rushed in the prior quarter to spend funds in its budget ending March.Still, private consumption remained healthy, with the passthrough of the Iran energy shock limited by state fuel subsidies. Moreover, fixed investment and exports expanded by double digits, the first boosted by government capex and the latter by the decision of the U.S. Supreme Court in February to strike down Trump’s reciprocal tariffs.

GDP outlook: GDP growth should cool through October–December, in part reflecting an unfavorable base effect due to the above-trend expansions seen in the same period last year. After that, GDP growth should rise and stabilize near its long-run trend. The strength of this year’s El Niño weather pattern is key to watch, with the last ‘strong’ El Niño in 2023–2024 causing India’s monsoon to be the driest in five years. Moreover, the course of the Iran war will be important to monitor, with India vulnerable economically given its dependence on energy imports from the Middle East: Before the war, 45% of its crude oil imports, half of its LNG imports and 90% of its LPG imports passed via the Hormuz Strait.

Panelist insight: Nomura economists commented: “We maintain our recently upgraded FY26 (year ending March 2027) GDP growth forecast of 7.0% y-o-y, with a faster growth in H1 (7.4%), followed by a slightly softer H2 (6.6%). Concurrent indicators remain strong, but we expect some moderation in H2, driven by lower profit margins, deficient monsoons, public capex consolidation and an unfavourable base effect.” EIU analysts said: “The economy’s relative resilience during the Middle East conflict and supportive government policies have led us to revise our real GDP growth forecast for fiscal year 2026/27 (April-March) from 6.5% to 6.8%. The slowdown in domestic consumption demand will be offset to an extent by the government’s investment in infrastructure, support for exports from new trade agreements, sustained momentum in services and the continuing impact of goods and services tax (GST) rationalisation.”

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