India Q1 GDP growth seen at 7.3% as consumption, capex cushion Iran war shock: ET poll

India’s economic growth likely held above 7% in the first quarter of FY27, as resilient consumption and exports coupled with robust government capex defied supply chain disruptions and inflated commodity prices triggered by the Iran war.

Gross domestic product likely grew by a median 7.3%, showed an ET poll of 10 economists, with estimates ranging from 6.7% to 8%. RBI pegged June quarter growth at 7%. The economy grew 7.8% in the March quarter and 6.8% in Q1FY26. The National Statistical Office (NSO) will release official GDP data for Q1 on August 31.

“High frequency indicators across the industrial and services sectors have revealed a healthy picture of domestic volume growth in Q1FY27,” said ICRA’s chief economist Aditi Nayar.


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“They belie the concerns of a fallout of the West Asia conflict in the quarter,” said Nayar.

Radhika Rao, senior economist and executive director at DBS Bank, said corporate earnings indicators were also broadly constructive, with aggregate revenue growth across listed firms remaining resilient, though higher energy prices crimped profitability at oil marketing companies.

Industrial production grew by an average of 5.7% in Q1FY27, up from 3.8% in the previous quarter. Consumption also remained strong, with domestic passenger vehicle sales growing 25.6% on average in Q1FY27, nearly doubling from a 13.1% rise in Q4FY26. Electricity demand growth improved to 8.4% from 1.9% over the same period.

Investment activity strengthened, with the Centre’s capital expenditure rising 18.6% in Q1FY27, compared with 9.1% in the previous quarter.

“Manufacturing activity remained buoyant, supported by strong volume growth,” said Sakshi Gupta, principal economist at HDFC Bank. “The squeeze on profit margins has been offset by the increase in volume sales.”

Nayar however said elevated input costs likely weighed on profitability across some sectors, and consequently value-added growth in the quarter, compressing GDP expansion.

Services activity remained buoyant, with the services purchasing managers’ index rising to 58.6 on average in Q1FY27 from 58 in the previous quarter. Services exports also accelerated to 13.1% from 8.9% over the same period.

Rajani Sinha, chief economist at CareEdge Ratings, said sectors such as agriculture, public administration and trade, hotels, transport, communication and services related to broadcasting services could be a drag on the overall growth momentum in Q1, due to the likely impact of elevated energy prices and subdued travel activity amid the escalated geopolitical tensions.

She said agricultural growth is likely to be impacted by the delayed onset of the monsoon and softer agricultural activity during the quarter.

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Economists expect the strong performance in the fiscal first quarter to be followed by some moderation in the second and third quarters of FY27, as the fallout of the Iran war feeds through, and high raw material and energy prices dampen activity.

Outlook

Economists are likely to revise their FY27 growth projections upwards following the stronger-than-expected momentum in the first quarter. The ET poll puts the median FY27 GDP growth estimate at around 6.8%, with forecasts ranging from 6.5% to 7.5%.

CareEdge Ratings has already revised its FY27 GDP growth forecast to 7% from 6.7%. DBS Bank sees an upside bias to its estimate, while Kotak Mahindra Bank is also likely to revise its forecast to 7%.

However, weather-related and geopolitical uncertainties remain key risks to the outlook.

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“The spatial and temporal distribution of rainfall during the remainder of the season will be critical,” said Sinha. “On the external front, continued volatility in global energy prices remains a key risk factor.”

The World Bank and International Monetary Fund (IMF) pegged India’s FY27 growth at 6.6% and 6.4%, respectively. As per their estimates, India remains among the world’s fastest-growing major economies.