India’s economy expanded by 7.8% in the quarter ending June 2026, supported by strong growth across financial services, real estate, information technology, and professional services sectors.
The latest growth figure exceeded expectations from a Reuters poll, which had forecast a 7.1% expansion, and matched the 7.8% growth recorded in the previous quarter.
Services and Manufacturing Drive Growth
According to India’s Ministry of Statistics and Programme Implementation, manufacturing and services activity improved significantly during the June quarter, while agriculture and related sectors recorded weaker growth.
Aastha Gudwani, India chief economist at Barclays, said the economic impact of the Iran war has been less severe than initially expected. She noted that consumer demand has remained strong, with manufacturing, services, automobile sales, and loan growth continuing to perform well.
Of the 20 high-frequency economic indicators tracked by Barclays, only seven showed slower average growth between April and June compared with the January to March quarter, suggesting continued economic resilience.
India Growth Outlook Faces Global Risks
Despite the strong quarterly performance, the Reserve Bank of India has warned that economic growth could slow during the current financial year due to ongoing geopolitical uncertainty and elevated energy prices.
The central bank previously estimated India’s economy would expand by 7.0% in the June quarter and 6.7% during the financial year ending March 2027.
The RBI said that a turbulent global economic environment could affect domestic activity as energy costs and supply chain pressures remain uncertain. The central bank also highlighted potential risks from El Niño conditions, which could impact India’s monsoon season, agriculture output, and rural demand.
Inflation and Interest Rate Concerns
Higher energy costs have already contributed to rising inflation in India, with consumer prices increasing for nine consecutive months to reach 4.45% in July.
However, unlike some other Asian central banks, the Reserve Bank of India decided not to raise interest rates during its August policy meeting, maintaining its focus on supporting economic growth while monitoring inflation risks.
