CEA Nageswaran: India’s Q1 GDP beats at 7.8%; broad gains power growth, but trade risks loom

India’s economy expanded by a robust 7.8% in the first quarter of FY26, continuing its upward growth trajectory and outpacing several major global economies, according to data released on Friday. The strong performance was driven by buoyant services activity, resilient rural consumption, and rising investment, Chief Economic Adviser (CEA) V. Anantha Nageswaran said at a post-release briefing.

“The growth was broad-based,” said Nageswaran, adding that the composition of GDP growth remained well-distributed. The services sector, in particular, showed strong momentum, as reflected in high PMI readings. Agriculture also contributed positively, supported by favourable monsoon conditions and healthy kharif crop sowing.

Nageswaran noted that real agricultural wages have risen sharply, providing an encouraging outlook for rural demand and overall GDP growth in upcoming quarters. Additionally, net indirect taxes rose by nearly 18%, offering a notable boost to Gross Value Added (GVA)—though he cautioned that this may not continue in subsequent quarters.

Minimal impact from US tariffs

Addressing concerns around the 25% tariff hike imposed by the United States on Indian exports, which came into effect on August 27 and brings the total levy to 50%, the CEA downplayed its immediate economic impact.

As the industry continues to expand and with the services sector shining, overall the economic activity does not indicate any material slowdown, and the last year’s momentum continues, he added.

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Consumption and investment outlook

Urban demand has shown visible traction, while rural consumption has “held up very well,” Nageswaran said. Growth in sectors such as gems and jewellery points to sustained consumer confidence across income levels.

Investment trends are improving, aided by moderating inflation—both CPI and WPI—and expectations of lower borrowing costs in the months ahead.

The recent tax cuts announced in the Union Budget, combined with the anticipated GST rate revisions next week, are likely to support consumption further.

Under the proposed GST reforms, the Union government is looking to simplify the tax structure with a two-slab structure and a 40% rate.

Therefore, any drag on domestic spending from external factors such as US-linked export weakness will have a minimal spillover effect, he said.

Additional tariffs and secondary trade restrictions may weigh on Q2 figures but are seen as short-term disruptions rather than long-term structural challenges, according to Nageswaran.

India’s GDP forecast for FY26 remains unchanged at 6.3%–6.8%, buoyed by strong domestic demand, supportive fiscal policy, and improving investment sentiment.

Also read: India’s GDP could slip below 6% if 50% US tariffs continue: Goldman Sachs economist