Aug 31 (Reuters) - India's economy grew 7.8% in the April-June quarter, government data showed on Monday, comfortably beating expectations as a surge in investment and manufacturing activity offset weakness in mining and consumer-facing services.
The figure was higher than economists' expectations of 7.1% year-on-year growth in a Reuters poll, but slower than the revised 8.6% growth in the previous three months.
The Reserve Bank of India had projected first-quarter growth at 7%.
Here is some commentary:
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
"Q1 growth came in at 7.8% versus our estimate of 7.5%, led by upbeat domestic consumption, continued support from government spending, investments and healthy export performance.
Input cost pressures due to the West Asia conflict were offset by higher volume growth with sectors like manufacturing and electricity, gas growing by close to 9%. The stand-out sector remained services, with financial, real estate and professional services growing by a high of 12% in the quarter.
Going forward, we revise our GDP growth estimate for the full year to 7% from 6.8% taking into account the strong Q1 print and with monsoon performance broadly holding up during the Kharif season, limiting the risk for rural demand."
DHIRAJ NIM, ECONOMIST/FX STRATEGIST, ANZ RESEARCH, MUMBAI
"India's strong growth surprised on the upside for the 12th straight quarter. Prima facie, growth is led by investments and exports reflecting a balance of domestic and external demand. This raises upside to FY27 GDP growth forecast of 6.7% and should ease the way for monetary policy normalisation.
While encouraging, it remains to be seen if strong growth and a turnaround in the earnings cycle sustains to attract greater portfolio inflows into equities."
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
"The strong Q1 FY27 growth print reinforced the view that India's domestic demand cycle was more resilient than initially feared, with consumption, public capex and manufacturing providing a solid base despite external shocks. Other tailwinds from indirect tax relief, real rate buffer, modest pump price increases, and easier monetary conditions were also supportive.
Investors will look for indications of broadening out in momentum for private capex and investment in the second half of the year. Goods trade outlook will be clouded by still-high energy prices, though a concerted effort to diversify sources has proved to be a timely response to maintain supplies.
The key risks are now less about a softer domestic story and more about the persistence of high oil prices, rupee weakness and tighter global financial conditions. Scope for full-year growth to be north of 7% is high."
TANAY DALAL, SVP - BUSINESS & ECONOMIC RESEARCH, AXIS BANK, MUMBAI
"Q1 GDP growth of 7.8% underscores the economy's resilience, supported by government measures to cushion the impact of global shocks through subsidies and capital expenditure. Robust credit demand and resilient domestic consumption despite elevated prices further highlight the underlying strength of economic activity."
ADITI NAYAR, CHIEF ECONOMIST, ICRA LTD, NEW DELHI
"India's GDP growth moderated to 7.8% in Q1 FY2027 from the upward revised 8.6% in Q4 FY2026, while exceeding ICRA's estimate of 7.0% for the quarter.
Overall, economic activity remained robust during the April-June quarter despite the adverse impact of the West Asia conflict on some sectors as well as the unfolding impact of the uneven monsoon."
MADAN SABNAVIS, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI
"GDP growth for Q1 has come at a much higher-than-expected rate of 7.8% against our forecast of 7-7.2%. In nominal terms, growth was 10.3%, aided by higher inflation, which enters the deflation indices.
Growth has been spearheaded by capital formation, which has increased to 34.3% in nominal terms from 31.4% last year with growth of 20.4%. This is a major takeaway as this involves both private and government expenditure, with the former being driven by data centres and power besides metals.
Given this higher growth rate, we could expect GDP growth for the year to go up to 7%, which will be the fourth successive year of above-7% growth."
SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI FINANCIAL SERVICES, MUMBAI
"India's economy grew 7.8% in the June quarter, accelerating over the year-ago period and comfortably ahead of both market consensus and the RBI's projection. The surprise is more meaningful than the headline suggests: the run-up to the release was marked by expectations of a slowdown on weak early-monsoon rains and softening services indicators. The print instead points to domestic demand that is proving more durable than the high-frequency data implied.
We expect momentum to be sustained through the rest of the year, with consumption providing a steady floor and investment doing the incremental work. With broad-based supply-side recovery, an investment cycle that is visibly broadening beyond the public sector and inflation contained, the balance of risks to the growth outlook is tilting to the upside, and a full-year outturn above the RBI's projection now looks well within reach."
SACHCHIDANAND SHUKLA, GROUP CHIEF ECONOMIST, LARSEN & TOUBRO, MUMBAI
"Robust demand-side performance (investments ~12% & consumption 7%) has contributed to the stellar show this quarter. The investment-side turnaround is promising. At the aggregate level, with this kind of Q1 print, even with a waning momentum ,i.e slower growth in the subsequent quarters, a 7-7.2% annual real GDP growth is doable."
ARUN SINGH, CHIEF ECONOMIST, DUN & BRADSTREET, MUMBAI
"India's Q1 FY27 GDP growth of 7.8% highlights the economy's remarkable resilience amid global uncertainties. More importantly, the accompanying strength in economic activity indicates that growth is broad-based rather than driven by temporary factors.
The pickup in sectors linked to capital formation points to an investment cycle that is gradually strengthening, which bodes well for medium-term growth. Encouragingly, exports have also remained resilient despite a challenging external environment.
While risks from global geopolitics and trade disruptions persist, the latest data suggests that India has entered FY27 with stronger underlying momentum and a more balanced growth profile than previously anticipated."
Reporting by Kashish Tandon, Aleef Jahan, Abhinav Parmar, Saikeerthi, Urvi Dugar and Anuran Sadhu in Bengaluru; Compiled by Abinaya V; Editing by Sonia Cheema
Source: Reuters