New Delhi: Pinning hopes on the underlying resilience of the Indian economy, Chief Economic Adviser (CEA) V Anantha Nageswaran on Saturday said the high growth momentum exhibited in the first quarter of the current fiscal is expected to continue in the coming quarter as well, with a downward bias emanating from high US tariffs.
The Indian economy reported a stronger-than-expected 7.8 per cent growth in April-June, its fastest pace in five quarters.
“I think the first quarter numbers for the fiscal year were definitely better than expected. A lot of people attributed the fact that the GDP deflator was much weaker this year compared to last year… in some sense, the GDP deflator being on the weaker side was a good thing and was not an unknown aspect. That was factored into the consensus expectations of Indian economists in the private sector.
Nageswaran noted that real agricultural wages have risen sharply, providing an encouraging outlook for rural demand and overall GDP growth in the upcoming quarters. Additionally, net indirect taxes rose by nearly 18%, offering a notable boost to Gross Value Added (GVA)—though he cautioned that this may not continue in subsequent quarters.
Addressing concerns around the 25% tariff hike imposed by the United States on Indian exports, which came into effect on August 27 and brings the total levy to 50%, the CEA downplayed its immediate economic impact.
As the industry continues to expand and with the services sector shining, overall the economic activity does not indicate any material slowdown, and the last year’s momentum continues, he added.
Urban demand has shown visible traction, while rural consumption has “held up very well,” Nageswaran said. Growth in sectors such as gems and jewellery points to sustained consumer confidence across income levels.
Investment trends are improving, aided by moderating inflation—both CPI and WPI—and expectations of lower borrowing costs in the months ahead.
The recent tax cuts announced in the Union Budget, combined with the anticipated GST rate revisions next week, are likely to support consumption further.
Under the proposed GST reforms, the Union government is looking to simplify the tax structure with a two-slab structure and a 40% rate.
Therefore, any drag on domestic spending from external factors such as US-linked export weakness will have a minimal spillover effect, he said.
Additional tariffs and secondary trade restrictions may weigh on Q2 figures but are seen as short-term disruptions rather than long-term structural challenges, according to Nageswaran.
India’s GDP forecast for FY26 remains unchanged at 6.3%–6.8%, buoyed by strong domestic demand, supportive fiscal policy, and improving investment sentiment.
