Against the backdrop of new trade tensions with the U.S., India’s economy grew by a surprising 7.8% in the April-June quarter. This growth exceeded the 6.7% forecast by economists polled by Reuters and was a notable increase from the 7.4% growth in the previous quarter.
The U.S. has recently increased its tariffs on Indian goods, with rates now as high as 50%, which could negatively impact Indian exports like textiles and chemicals. In response, Prime Minister Narendra Modi’s government has pledged support for affected sectors and is considering tax cuts to boost domestic spending.
The gross value added (GVA), a more precise indicator of economic activity, also showed strong growth, rising to 7.6% from 6.8% in the prior quarter. Despite a potentially challenging export environment, India remains one of the fastest-growing major economies.
Growth was driven by several key sectors:
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Manufacturing output grew by 7.7%, up from 4.8% in the previous quarter.
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Construction expanded by 7.6%.
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The agriculture sector grew by 3.7%.
The Reserve Bank of India noted that while the economy is resilient, thanks to strong rural demand, the trade dispute with the U.S. poses a risk. The bank predicts a 6.5% growth for the fiscal year ending in March 2026 and has kept its key interest rate at 5.50%.
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