Capital formation and exports boost Q1FY27 GDP growth to 7.8%
Manufacturing also remained robust, FY27 economic growth seen at atleast 7%
- Aug 31, 2026,
- Updated Aug 31, 2026 7:06 PM IST
Despite the conflict in West Asia that delivered a supply and price shock on crude oil and key imports, the Indian economy remained resilient and registered a growth of 7.8% in the first quarter of the fiscal powered by a strong expansion in investments and exports. With the monsoon deficit lower than anticipated, expectations are that the economy would continue to grow at a robust pace in the next two quarters as well with GDP growth for FY27 seen at 7%.
Official data released on Monday revealed that real GDP grew at an estimated 7.8% in the first quarter of FY27 as against 6.9% a year ago but slowed from 8.6% in the fourth quarter of last fiscal. Nominal GDP has witnessed a growth of 10.3% in Q1 of FY 2026-27, against the growth of 8.1% during Q1 of FY 2025-26. Gross value added registered a growth of 8.2%.
“Domestic activity held up through July…industrial momentum remained strong…agriculture is progressing steadily,” said Chief Economic Adviser V Anantha Nageswaran in a press briefing to reporters, adding that in the near term, while domestic demand and investment remain the anchors, food prices, monsoon progression and global uncertainty deserve monitoring.
Amongst sectors, while financial services, real estate, IT, professional services grew at the fastest pace of 12.1% in the first quarter of the fiscal, manufacturing also expanded at a robust 9.2%.
Meanwhile, gross fixed capital formation grew by 11.9% in the first quarter of the fiscal while private final consumption expenditure also remained healthy with a 7.1% growth. Exports also registered a 12% growth in the first quarter of the fiscal.
“GDP growth in the first quarter of 2026-27 suggests that despite adverse economic situation due to West Asia crisis, Indian economy has remained resilient. Strong investment momentum since the second quarter of FY26 has continued and shown an upward trajectory. The government (both centre and states) along with central public sector enterprises has continued to undertake capex,” said Devendra Pant, Chief Economist, India Ratings & Research. Aggregate capex of centre, states and CPSEs grew 16.9% in 1QFY27 as against 11.4% in FY26, he said, adding that GDP growth in FY27 is likely to cross 7%.
Madan Sabnavis, Chief Economist, Bank of Baroda also said that given the higher growth rate, GDP growth for the year could go up to 7% for the year, which will be the fourth successive year of above 7% growth.
“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,” he underlined.
From Q1FY27, the ministry of statistics and programme implementation (MOSPI) has also used double deflation approach for estimating the GVA of the Manufacturing sector.
Significantly, MOSPI also released the National Accounts Statistics – 2026 on Monday that has revised upwards GDP growth rates for FY24, FY25 and FY26. While GDP growth in FY26 has been revised up to 7.8% from 7.7%, for FY25 it has been revised to 7.2% from 7.1% and for FY24 to 7.3% to 7.2%.
The ministry said that the revision is due to the incorporation of updated indicators, including the index of industrial production and the producer price index.
Despite the conflict in West Asia that delivered a supply and price shock on crude oil and key imports, the Indian economy remained resilient and registered a growth of 7.8% in the first quarter of the fiscal powered by a strong expansion in investments and exports. With the monsoon deficit lower than anticipated, expectations are that the economy would continue to grow at a robust pace in the next two quarters as well with GDP growth for FY27 seen at 7%.
Official data released on Monday revealed that real GDP grew at an estimated 7.8% in the first quarter of FY27 as against 6.9% a year ago but slowed from 8.6% in the fourth quarter of last fiscal. Nominal GDP has witnessed a growth of 10.3% in Q1 of FY 2026-27, against the growth of 8.1% during Q1 of FY 2025-26. Gross value added registered a growth of 8.2%.
“Domestic activity held up through July…industrial momentum remained strong…agriculture is progressing steadily,” said Chief Economic Adviser V Anantha Nageswaran in a press briefing to reporters, adding that in the near term, while domestic demand and investment remain the anchors, food prices, monsoon progression and global uncertainty deserve monitoring.
Amongst sectors, while financial services, real estate, IT, professional services grew at the fastest pace of 12.1% in the first quarter of the fiscal, manufacturing also expanded at a robust 9.2%.
Meanwhile, gross fixed capital formation grew by 11.9% in the first quarter of the fiscal while private final consumption expenditure also remained healthy with a 7.1% growth. Exports also registered a 12% growth in the first quarter of the fiscal.
“GDP growth in the first quarter of 2026-27 suggests that despite adverse economic situation due to West Asia crisis, Indian economy has remained resilient. Strong investment momentum since the second quarter of FY26 has continued and shown an upward trajectory. The government (both centre and states) along with central public sector enterprises has continued to undertake capex,” said Devendra Pant, Chief Economist, India Ratings & Research. Aggregate capex of centre, states and CPSEs grew 16.9% in 1QFY27 as against 11.4% in FY26, he said, adding that GDP growth in FY27 is likely to cross 7%.
Madan Sabnavis, Chief Economist, Bank of Baroda also said that given the higher growth rate, GDP growth for the year could go up to 7% for the year, which will be the fourth successive year of above 7% growth.
“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,” he underlined.
From Q1FY27, the ministry of statistics and programme implementation (MOSPI) has also used double deflation approach for estimating the GVA of the Manufacturing sector.
Significantly, MOSPI also released the National Accounts Statistics – 2026 on Monday that has revised upwards GDP growth rates for FY24, FY25 and FY26. While GDP growth in FY26 has been revised up to 7.8% from 7.7%, for FY25 it has been revised to 7.2% from 7.1% and for FY24 to 7.3% to 7.2%.
The ministry said that the revision is due to the incorporation of updated indicators, including the index of industrial production and the producer price index.