India’s Q1 GDP growth at 7.8% shows stability, says CEA; calls tariffs an opportunity for reforms

India’s Chief Economic Advisor (CEA) said the 7.8% GDP growth in the April–June quarter of FY26 reflects strengthening growth momentum and macro-economic stability, with consumption and investment continuing to anchor the economy. His remarks followed the release of official data showing India’s fastest quarterly expansion in five quarters, even as the recent US tariff hike clouds the export outlook.

The CEA said the tariff action should be seen as “an opportunity to move forward in domestic reforms, deregulation and explore other export markets.”

"We expect GDP growth to remain within the targeted band of 6.3-6.8%. Of course, there are some downside risks," said CEA.


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According to him, private final consumption expenditure’s share in GDP during the quarter was the highest in 15 years. Urban demand is picking up with FMCG sales and UPI transactions showing strength, while rural consumption remains resilient—FMCG sales volume in rural areas rose 8.4% in the June quarter.

On investment, the CEA noted that capital formation gained momentum. The Centre’s capital expenditure grew 30.1% in Q1 compared with the three-year average, while capital goods output stayed strong. Gross fixed capital formation rose 7.8% at constant prices, underscoring investment-led growth.

The CEA highlighted that kharif crop sowing is tracking at the higher end of historical trends, aiding farm output. Agriculture grew 3.7% in Q1 compared to 1.5% a year earlier. Industry maintained steady growth, while the services sector remained the key growth driver with a 9.3% expansion.

He also said PMI levels for both manufacturing and services are above pre-Covid benchmarks and higher than the last two fiscal years. Trade activity remains firm, with core exports growing faster than pre-Covid levels. Inflationary pressures have eased, and the labour market is showing positive signs.

India's GDP grows at 7.8% in Q1
The National Statistics Office (NSO) estimated real GDP at Rs 47.89 lakh crore in Q1 FY26, up from Rs 44.42 lakh crore a year earlier. Nominal GDP rose 8.8% to Rs 86.05 lakh crore. While mining contracted 3.1% and utilities growth moderated to 0.5%, agriculture and services lifted overall growth.

India continues to be the fastest-growing major economy, ahead of China’s 5.2% growth in the same quarter. Economists, however, have cautioned that global trade risks and the higher US tariffs could weigh on exports in the months ahead.