New Delhi: India’s economic growth likely moderated to 7.1% year-on-year in the April-June 2026 quarter, down from 7.8% in the previous three months, according to a Reuters poll of economists released on Tuesday, August 25.
The median estimate from 58 economists suggests that Asia’s third-largest economy remained resilient but lost some momentum as private investment weakened, even while consumer demand and government spending continued to support activity.
GDP Growth Expected at 7.1%
Economists polled by Reuters forecast that India’s real Gross Domestic Product expanded by 7.1% in the first quarter of the 2026-27 financial year.
If the estimate is confirmed by official data, growth would have slowed from the 7.8% recorded during January-March 2026.
Despite that moderation, India would remain among the fastest-growing major economies in the world.
The government is expected to release the official April-June GDP figures later this week.
Private Investment Loses Momentum
One of the main factors behind the expected slowdown is weaker private-sector investment.
India had recorded a strong improvement in investment during the January-March quarter, with private investment growing 10.8% year-on-year, its fastest pace under the current data series.
However, economists surveyed by Reuters said that surge may have been temporary.
Businesses are becoming more cautious because of geopolitical uncertainty, higher energy costs and weaker confidence about the global economic outlook.
These conditions could discourage companies from committing to major new factories, equipment and expansion plans.
Consumer Spending Continues to Support Economy
Household consumption remains an important source of strength.
Tax reductions introduced last year have helped support disposable incomes and consumer spending despite inflationary pressures.
Strong domestic consumption has helped India absorb some of the weakness coming from private investment and uncertainty in international markets.
Government spending has also continued to provide support through infrastructure and other public expenditure.
Exports Provide Additional Support
India’s external sector has also remained relatively resilient.
Reuters reported that exports of goods and services grew around 11%, providing another source of momentum during the quarter.
Continued demand for Indian services and manufactured products has helped offset some of the pressure caused by volatile global financial markets.
However, economists remain cautious about the coming quarters as wars, trade uncertainty and higher commodity prices threaten international demand.
Oil Above $90 Creates Major Risk
One of the biggest threats to India’s growth outlook is the sharp rise in global crude oil prices.
Oil prices have remained above $90 per barrel amid continuing tensions in the Middle East.
India imports more than 85% of the crude oil it consumes, meaning prolonged high prices can significantly affect the economy.
Expensive crude increases costs for:
- Transport and logistics
- Airlines
- Manufacturing companies
- Chemical and fertiliser producers
- Households
- Government fuel subsidies and related expenditure
Higher energy prices can also push inflation upward and reduce the amount consumers have available to spend on other goods and services.
Rupee Weakness Adds to Pressure
The Indian rupee has also weakened significantly during 2026.
Reuters said the currency has depreciated by around 6% this year, increasing the cost of imports priced in US dollars.
A weaker rupee can make imported crude oil, electronics, machinery and other products more expensive.
The Reserve Bank of India has repeatedly intervened in foreign-exchange markets in recent weeks to limit excessive currency volatility.
Gross Value Added Seen Growing 7.2%
The Reuters poll also estimated that Gross Value Added (GVA) likely expanded by approximately 7.2% during the April-June quarter.
GVA measures the value created by different sectors of the economy and is often used alongside GDP to understand underlying economic activity.
The relatively strong estimate suggests that underlying production and services activity remained healthy even as headline GDP momentum eased.
Economists See Further Moderation Ahead
Growth could slow further during the July-September quarter.
The Reuters poll forecast GDP growth of approximately 6.6% in the next quarter, while the economy is expected to expand around 6.7% for the full 2026-27 financial year.
That full-year estimate is broadly aligned with the Reserve Bank of India’s current growth projection.
The RBI raised its FY27 growth forecast to 6.7% earlier this month while maintaining a cautious stance because of inflation risks linked particularly to oil prices.
Interest Rates Expected to Remain Unchanged for Now
The Reuters survey also indicated that economists generally expect the RBI to keep interest rates unchanged for at least the next several months.
The central bank maintained its repo rate at 5.25% at its August policy meeting but signalled that it could consider raising rates later if inflation pressures intensify.
High oil prices are especially important because they could push up transportation and production costs across the economy.
If these pressures spread into broader inflation, the RBI may face a difficult balance between supporting economic growth and controlling prices.
India Remains Resilient Despite New Risks
A 7.1% growth rate would still represent a strong economic performance by global standards.
Consumer demand, exports and government expenditure continue to provide substantial support to the Indian economy.
However, the outlook has become more uncertain because of high crude oil prices, rupee weakness, subdued private investment and geopolitical tensions.
The official April-June GDP figures will therefore be closely watched to determine whether India can sustain growth above 7% and how much momentum the economy carries into the remainder of the financial year.
Source – Reuters
Supreme News Network
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