India GDP grows 7.8% in Q1, defying oil shock and tariff risks

September 3, 2026 at 10:45 AM2 min

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India's GDP grew 7.8% in the first quarter, beating forecasts and defying the Middle East oil shock. The growth was driven by a 12% rise in exports and a nearly 12% increase in gross fixed capital formation. The data sparked controversy over its credibility amid ongoing concerns about youth unemployment.

Key Facts

India's GDP grew 7.8% in the first quarter, beating forecasts.
Exports grew by 12% despite tariff uncertainties.
Gross fixed capital formation rose nearly 12% in the first three months of the year.
The Indian rupee slumped 15% against the US dollar, which economists say may have improved competitiveness.
Prime Minister Narendra Modi reacted to the GDP data on X, writing 'Doomsayers were doomed and India bloomed… Yet again.'

Growth Drivers

Sajjid Chinoy, chief India economist at JP Morgan, said India's cyclical growth recovery had been visible for the past six months, driven by fiscal stimulus including direct tax cuts in February last year, a reduction of consumption taxes in September, and interest rates down about 1.5% since early 2025. Chinoy credited the government for rapidly diversifying energy imports in the face of the Strait of Hormuz blockade, which helped protect growth. A strong acceleration in exports and a surge in private corporate investments also powered Asia's third largest economy ahead amid global energy market disruption. Economists reckon a 15% slump in the Indian rupee against the US dollar may have helped companies improve their competitiveness, driving up demand for Indian goods.

Investment and Credibility

India's gross fixed capital formation, a core indicator of total domestic public and private investment, rose nearly 12% in the first three months of the year. Madan Sabnavis, chief economist with the state-run Bank of Baroda, said non-government data points to investment intentions of companies going up in recent months, with announcements concentrated in data centres, renewable energy and metals. Sabnavis added that private investment is not broad-based yet, but these are definitely signs of a pick up. The GDP data sparked a major controversy over its credibility, even as Prime Minister Modi faces scathing student anger over exam paper leaks and rising youth unemployment.