India’s economic growth has shown signs of slowing down in the first quarter of 2026, with GDP growth estimated at 7.2%, according to a Reuters poll of economists. This marks a decline from the 7.8% expansion seen in the previous quarter. The slowdown is attributed to softer external demand and reduced industrial activity, although government spending and agricultural growth have remained robust.

Global Factors Impacting Growth

Several external factors have contributed to this economic deceleration. Increased U.S. tariffs on Indian goods and the ongoing U.S.-Israeli conflict with Iran, which has led to higher crude oil prices, have posed challenges. Despite these obstacles, India continues to hold its position as the world’s fastest-growing major economy.

Economists emphasize the importance of private investment for job creation, particularly as millions enter India’s workforce annually. However, global uncertainties have dampened private investment, placing a greater burden on government capital expenditure to drive growth.

Sectoral Insights

Gross value added (GVA), which excludes taxes and subsidies, is estimated to have grown by 7.3%. The data, expected on June 5, will be the second quarterly report under India’s revised national accounts series, following a change in the GDP base year to 2022/23.

Dhiraj Nim, an economist at ANZ, notes a shift from broad-based expansion to uneven growth, with government spending maintaining a healthy pace while external demand weakens. Industrial activity has softened, with slower manufacturing volumes and exports impacting output. Agriculture, however, has provided a modest cushion to growth.

Sajjid Chinoy, chief India economist at J.P. Morgan, highlights strong services growth supported by accelerating credit growth and higher GST collections. In contrast, manufacturing growth remains subdued, and the impact of the Middle East crisis is expected to become more apparent in the second quarter.

Future Outlook

Looking ahead, economists predict GDP growth will slow to 6.5% in the next quarter and average 6.7% for the current fiscal year, with a slight increase to 6.9% anticipated next year. The Reserve Bank of India’s upcoming monetary policy decision is also under scrutiny, with most economists expecting the policy rate to remain unchanged at 5.25%, although a rate hike is anticipated by the end of 2026.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.