Is India’s GDP Growth of 7.8% a Good Sign Amidst Global Challenges?

New Delhi, Aug 30 (NationPress) Economists based in Delhi celebrated India's impressive GDP growth of 7.8 percent in the initial quarter of the financial year 2025-26. They characterized this achievement as a robust performance, significantly influenced by the manufacturing, construction, and services sectors, and deemed it a positive indication amidst global economic challenges.

Economist Aakash Jindal remarked to IANS, “India’s economy has expanded at a remarkable rate of 7.8 percent in the June quarter. In contrast to other major economies such as Germany, the US, Japan, and the UK, which are experiencing stagnant or negative growth, India demonstrates a capacity for swift expansion. Despite past adversities like COVID-19 and current US tariffs, India has shown significant resilience. Over the last five years, as global economies decelerated, India has continued its trajectory of strong growth.”

Chief Economist at Canara Bank, Manoranjan Sharma, also expressed optimism, stating, “This figure is particularly commendable, especially during a period where global challenges such as the Ukraine-Russia conflict, US tariffs, and uncertainties in the Middle East prevail. We anticipated growth around 6.5 percent, but the results have exceeded expectations. This will bolster India's standing on the global stage.”

He further emphasized the agriculture sector, noting a significant increase in its contribution.

“Currently, the direct impact of US tariffs has been minimal. However, potential repercussions may emerge in the months ahead. Focusing on promoting domestic products can further enhance growth. Overall, this is a very favorable and motivational signal for India's economy,” Sharma added.

According to Crisil, India's gross domestic product (GDP) is anticipated to grow by 6.5 percent in this fiscal year, facing downside risks due to US tariff increases.

The real GDP growth rate surged to 7.8 percent year-on-year in Q1 of this fiscal, compared to 7.4 percent in the previous quarter.

“Supply-side growth rebounded by 7.6 percent, primarily driven by the services sector, influenced by a statistical low-base effect. The manufacturing sector benefited from decreased input costs in the context of rising domestic demand and improved export shipments,” explained Dipti Deshpande, Principal Economist at Crisil.

Consumer demand, supported by healthy rural incomes, lower inflation and interest rates, and income tax relief, is likely to remain strong in the upcoming quarters, aiding overall GDP growth. Additionally, robust government investment spending will continue to act as a stabilizing force.

On the demand front, household consumption increased to 7 percent from 6 percent. Government spending also gained momentum, with improvements seen in government consumption expenditure and investment.

The acceleration of capital expenditure by both state and central governments (combined at 27.8 percent year-on-year during the quarter) significantly supported growth. A surge in exports prior to the US tariff hikes also contributed positively.

“However, India's export advantages may diminish in subsequent quarters due to the 50 percent tariff hikes implemented by the US. Furthermore, a broader global economic slowdown, prompted by these tariff actions, could dampen external demand,” Deshpande noted.

Moreover, elevated US tariffs and uncertainties could potentially hinder domestic private investments this fiscal year. The tariffs, compounded by a global trade slowdown and geopolitical uncertainties, are expected to have a varied impact on the Indian economy.

In the absence of a trade agreement between India and the US, certain sectors may need to prepare for a more significant impact due to the US tariffs.

Particularly, the micro, small, and medium enterprises (MSME) sector, which contributes to 45 percent of India’s total exports, is facing significant challenges, according to Crisil.