India’s GDP growth beats RBI forecast in June quarter, expands 7.8%

DRIVEN BY near double-digit growth in manufacturing and services sectors, the economy grew a robust 7.8% year-on-year in the April-June quarter, despite the headwinds caused by the West Asia conflict, high energy prices and supply disruptions.

This is well above the Reserve Bank of India forecast of 7%. The manufacturing sector grew by 9.2% in April-June, up from 8.3% in the same quarter last year, while the tertiary sector — or services — expanded 10%, higher than 8% a year ago, data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday showed.

Prime Minister Narendra Modi said the 7.8% figure “is a herculean feat”. Finance Minister Nirmala Sitharaman said the government’s reforms and its “agile management” of the economy are bearing results. “What we are witnessing is continuous resilience in the Indian growth performance,” said Chief Economic Advisor V Anantha Nageswaran, addressing reporters via video-conference from the US where he is attending G20 meetings.

Analysts, however, said high growth rates could mean a rate hike is on the horizon. A fast growing economy, inflation prints ambling northwards, zero real interest rates, RBI monetary policy members looking at rate hike scenarios, and oil prices showing few signs of cooling, all these put together make a case for policy rate hike this year stronger than before, said Venkatesh Balakrishnan, Head-Credit Research, SBI Capital Markets.

Earlier this month, on August 5, the RBI had left the repo rate unchanged at 5.25%. The CEA warned that disruptions from West Asia are expected to last longer than initially expected. As such, there is “always a lurking risk of crude oil supply disruption which may prevent oil prices from declining “materially and sustainably below $80 per barrel”.

The economy weathered the West Asia conflict and the resultant turbulence, but the disruptions and high crude oil prices may last longer. This may push up inflation in India, and affect consumption in the US and Europe due to higher petrol and diesel prices.

“However, more than the rise of crude oil, what we should be watching are the prices of petroleum products such as diesel and natural gas which have basically made it more expensive and that will have an implication for private consumption growth in parts of Europe and in the US,” Nageswaran said.

Sequentially, the April-June GDP growth rate is lower than the 8.6% recorded in January-March, which was revised up from the previous estimate of 7.8%. It is, however, well above the 6.9% posted in the April-June quarter last year.

As a result, economists have already begun raising their growth forecasts for 2026-27 as a whole. CareEdge Ratings, for instance, has raised its growth estimate for the year by 30 basis points (one basis point is a hundredth of a percentage point) to 7.3%, significantly higher than the RBI full-year estimate of 6.7%.

Estimated growth of real GDP in Q1 of FY 2026–27 is 7.8%. Nominal GDP in Q1 of FY 2026–27 is estimated to have grown by 10.3%, while Real GVA has recorded growth of 8.2%. The credit for this strong performance goes to the people of India and their hard work.

Reforms undertaken… — Nirmala Sitharaman (@nsitharaman) August 31, 2026