Mithilesh Kumar Sinha
Retired Professor, Nagaland University, Lumami
In the first quarter of the fiscal year 2026-27, the estimated Real GDP, or GDP at Constant Prices, stands at Rs 81.36 lakh crore, compared to Rs 75.46 lakh crore in the first quarter of FY 2025-26, reflecting a growth rate of 7.8%. The Nominal GDP, or GDP at Current Prices, for Q1 of FY 2026-27 is projected at Rs 88.27 lakh crore, up from Rs 80.00 lakh crore in Q1 of FY 2025-26, indicating a growth rate of 10.3%. For the first quarter of FY 2026-27, Real GVA is estimated at Rs 73.82 lakh crore, an increase from Rs 68.21 lakh crore in Q1 of FY 2025-26, which corresponds to a growth rate of 8.2%. Meanwhile, Nominal GVA for Q1 of FY 2026-27 is anticipated to be Rs 80.53 lakh crore, rising from Rs 72.24 lakh crore in Q1 of FY 2025-26, showcasing a growth rate of 11.5%
The services sector emerged as the primary contributor to the overall growth, achieving a remarkable 10.0% increase at constant prices. Within this sector, the Financial, Real Estate, IT, and Professional Services segment led the growth with an impressive 12.1%.
The secondary sector, which includes manufacturing, utilities, and construction, experienced a growth of 8.6%. In contrast, the primary sector, represented by agriculture and related activities, saw a more modest growth of 2.9%, although this still marks an improvement.
In the first quarter of 2026-27, services experienced a 10% expansion, while investment surged by 11.9%, ensuring that India's two primary growth engines remained active despite the challenges posed by war and protectionism. On the expenditure front, Gross Fixed Capital Formation—representing investment—witnessed an impressive growth of 11.9%, which is more than double the rate recorded in the same quarter of the previous year (5.8%). When considered alongside the significant growth in electricity, gas, water supply, and other utility services, this indicates promising growth prospects in the upcoming quarters. Consumption also demonstrated strong growth at 7.1%, slightly surpassing the 6.8% recorded during the same period last year. The robust growth in consumption, coupled with an accelerated pace of investment growth, suggests that the two essential engines of growth are functioning effectively.
The narrative surrounding consumption is particularly significant, as India faced the negative repercussions of the conflict in West Asia during the interval between the last quarter of 2025-26 and the first quarter of 2026-27. The government absorbed the financial impact of this external shock. Government Final Consumption Expenditure experienced a slight decline, falling to 4.3% compared to 4.5% in the first quarter of the previous year.
Prior to the announcement, most forecasts were in the range of 7-7.2. Thus, the unexpectedly strong figures represent a positive surprise, especially considering that oil refining companies faced challenges during the quarter due to the conflict in West Asia. These results are particularly notable against a backdrop of a bleak global economic landscape, where wars and protectionist measures are undermining the world’s economic outlook. The data indicates that the economy has continued to grow despite global challenges, including the rise in crude oil prices stemming from the ongoing conflict in West Asia, which affected the quarter. This quarterly GDP growth rate of 7.8% establishes India as the fastest-growing major economy globally, significantly advancing its progress towards comprehensive development and structural transformation.
Impacts:
The increasing activity in core sectors, particularly with manufacturing growth exceeding 9%, is set to propel industrial modernization. This will bolster initiatives such as Make in India, drawing foreign direct investment (FDI) into supply chains. Additionally, it will empower small and medium enterprises to integrate into high-value domestic and international production networks. The significant growth in construction and manufacturing is expected to create millions of formal and semi-formal jobs for a youthful demographic. Continued expansion will also enable lower-income groups to enter the formal financial system through enhanced consumption capacity. The modernization of logistics, digital networks, and energy grids will reduce structural transaction costs for businesses.
Recent data offers some reassurance to policymakers striving to maintain growth while navigating risks associated with geopolitical tensions and fluctuating commodity markets. However, there are underlying risks and vulnerabilities, such as the potential for rapid demand combined with energy shocks to increase retail food and fuel prices. External geopolitical tensions or restrictive monetary policies could also pressure import bills and external balances. Furthermore, disparities may continue if wealth becomes concentrated in capital-intensive sectors rather than labor-intensive ones, an issue that must be addressed comprehensively.
