India’s economy expands 7.8% in fiscal first quarter, beating estimates

India’s GDP grew 7.8% year-over-year in the first quarter of fiscal year 2026-27, comfortably beating the consensus forecast of 7.1-7.3% and cementing the country’s position as the fastest-growing major economy on the planet.

The figures, released by the Ministry of Statistics and Programme Implementation on August 31, showed real GDP reaching ₹81.36 lakh crore, up from ₹75.46 lakh crore in the same quarter a year earlier. Nominal GDP reached ₹88.27 lakh crore, representing a 10.3% increase.

What drove the outperformance

Manufacturing, construction, and utility services did the heavy lifting. Gross Value Added rose 8.2% to ₹73.82 lakh crore.

Government capital expenditure played a meaningful role. The central government deployed 27.8% of its full-year budget estimate for capital spending in Q1 alone, up from 24.5% in the year-ago quarter.

High-frequency indicators backed up the headline number. Passenger vehicle sales surged 24% in June, and electricity demand showed significant growth.

The growth rate also exceeded the Reserve Bank of India’s own projection of 7% for Q1. SBI Research had been the most bullish among pre-release forecasters, calling for growth near 8% based on consumption trends and industrial momentum. More conservative outfits like ICRA and Bank of Baroda had clustered around 7%, citing agricultural headwinds.

The bigger picture

This quarter’s performance matched the 7.8% clip seen in Q4 of the previous fiscal year. For the full previous fiscal year (FY2025-26), the economy expanded 7.7%, and projections for FY26 currently sit at a similar 7.7%.

Agriculture remains the soft spot. Monsoon-related disruptions weighed on farm output, dragging on the sector’s contribution to overall growth. Roughly 42% of the workforce is still tied to agriculture.