India鈥檚 economy grew at a faster pace than expected in the April-June quarter, official data showed Friday, although US tariff concerns have clouded the outlook for the remaining fiscal year.
Gross domestic product grew 7.8 per cent year-on-year in the three months ending June 30, the fastest pace of growth in five quarters.
The June quarter figures are higher than the 7.4 per cent expansion recorded in the previous three months and well above market expectations of 6.7 per cent growth.
鈥楾his is a real surprise,鈥� Teresa John, economist at Nirmal Bang Institutional Equities, told AFP.
鈥楪rowth in this quarter is primarily due to a couple of factors. There is the clear uptick in government spending and then the services sector has performed better.鈥�
The quarterly performance was also helped by decent manufacturing sector growth and improved consumer sentiment.
Friday鈥檚 reading reaffirms India鈥檚 position as the fastest-growing major economy and will come as welcome news for prime minister Narendra Modi, who is trying to navigate through US president Donald Trump鈥檚 harsh tariff blitz.
Trump has slapped 50-per cent tariffs on most Indian products 鈥� among the highest duty rates in the world 鈥� as punishment for New Delhi鈥檚 purchases of Russian oil, which Washington claims helps finance Moscow鈥檚 invasion of Ukraine.
Indian shipments to the US largely held up between April and July, mostly due to exporters front-loading goods to beat tariff deadlines and robust growth in exempted exports, such as iPhones.
But with the 50-per cent tariffs having kicked in this week, experts are projecting a sharp fall in exports.
鈥業t鈥檚 unclear if this (June quarter) pace of growth can be sustained for the rest of the year, given the headwinds of tariffs,鈥� John told AFP.
The Global Trade Research Initiative, a New Delhi-based think-tank, estimates that if the harsh tariffs stick, India鈥檚 exports could fall to about $49.6 billion聽 in the current fiscal year 鈥� a steep fall from the $86.5 billion recorded last fiscal.
The world鈥檚 fifth-largest economy slowed down in the second half of 2024, with annual growth hitting a four-year-low in the fiscal year that ended March 31.
While growth started to rebound in the first three months of 2025, the drop in economic activity prompted Modi鈥檚 government to announce widespread income tax cuts in February.
India鈥檚 central bank also delivered its first rate cut in five years that same month and followed it up with further reductions in April and June.
Trump鈥檚 chaotic trade policies have provided further incentive for Indian policymakers to improve growth.
Modi proposed vast consumption tax cuts this month in an overhaul of India鈥檚 goods and services tax system, a move that analysts say will boost spending in the world鈥檚 most populous nation.
Local media report the government is planning a $2.8-billion relief package for exporters, including liquidity-easing measures.
