India’s Q1 GDP Growth Seen Slowing To 7.2% Amid External Headwinds

India’s gross domestic product (GDP) growth is projected to ease to 7.2% year-on-year in the January-March quarter of 2026, according to a Reuters poll of economists, compared with 7.8% growth recorded in the previous quarter.

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The Reuters poll, conducted between May 22 and June 1 among 45 economists, showed estimates ranging from 6.1% to 7.7%. The official GDP data is scheduled to be released on June 5.

In spite of various disruptions in the global environment, including increased U.S. tariff rates on Indian products and the dispute between the U.S. and Israel against Iran over crude oil prices, India is poised to remain the fastest-growing major economy. Nevertheless, according to some economists, the external factors and slack manufacturing output could have dampened the growth performance.

Government Spending Supports Economic Activity

Economists expect government expenditure to have remained a key driver of growth during the quarter, helping offset weakness in some other sectors.

Gross value added (GVA), which measures economic activity excluding taxes and subsidies, is estimated to have increased 7.3%, based on forecasts from a smaller group of respondents in the Reuters survey.

The upcoming data will be the second quarterly release under India’s revised national accounts framework. Earlier this year, the government updated the GDP base year to 2022-23 from 2011-12 and revised parts of its estimation methodology.

Dhiraj Nim, Economist at ANZ, told Reuters that government spending likely maintained healthy growth momentum, while external demand weakened amid global disruptions.

Manufacturing Activity Seen Softer

The Reuters survey suggested that industrial activity lost some momentum during the quarter. According to Dhiraj Nim, slower manufacturing volumes, weaker exports and pressure on margins are likely to have weighed on industrial output. He added that agriculture offered some support, with a modest improvement in performance helping cushion overall growth.

Services activity, however, is expected to have remained relatively strong. Sajjid Chinoy, Chief India Economist at J.P. Morgan, told Reuters that services growth was likely supported by continued credit expansion and higher GST collections. He noted that manufacturing growth was expected to be comparatively weaker during the period.

Outlook Remains Cautious

Economists surveyed by Reuters expect GDP growth to moderate further to 6.5% in the current quarter. For the full fiscal year, growth is projected to average 6.7%, before improving to 6.9% in the following year.

The impact of developments in West Asia is also expected to remain a key factor for the economy. Chinoy told Reuters that the effects of the Middle East conflict could become more visible from the second quarter onward.

Apart from the GDP data, market participants will also track the Reserve Bank of India’s monetary policy decision due on June 5. According to the Reuters poll, nearly 80% of economists expect the central bank to keep the policy repo rate unchanged at 5.25%, although most respondents anticipate at least one rate increase by the end of 2026.