India's Q1 GDP growth likely slows to 7.2%, four-quarter low amid mixed sectoral performance

India's economy is expected to have grown at 7.2 percent in the three months ending June, marking the slowest pace in a year. The figure, which economists polled by The Financial Express anticipate will be released by the Ministry of Statistics and Programme Implementation on August 31, sits below the prior quarter's 7.8 percent but edges above the Reserve Bank of India's own forecast of 7 percent. Estimates across the survey ranged from as low as 6.7 percent to as high as 8.0 percent, reflecting genuine uncertainty about how the economy navigated a period of global volatility and domestic weather disruptions.

The slowdown, while notable, still signals underlying resilience. Tanay Dalal, senior vice-president for business and economic research at Axis Bank, framed the above-7-percent outcome as evidence of "continued strength across high-frequency economic indicators" bolstered by government efforts to shield the economy from external shocks. Consumer spending appears to have remained the primary engine, with rural and urban demand indices showing sustained momentum even as input costs rose. The benefit of recent goods and services tax rate cuts and income tax reductions continued to support household purchasing power, economists at HDFC Bank noted in their analysis.

But the headline number masks significant sectoral divergence. Agriculture emerged as the quarter's principal headwind, with growth projected to slip below 3 percent from 3.6 percent in the preceding quarter—a direct consequence of delayed monsoon rains that disrupted planting and crop development across much of the country. The services sector, which had expanded at nearly 10 percent just three months earlier, is expected to moderate to around 8 percent, dragged down particularly by trade, hotels, and transport activities. Yet within this mixed picture, industrial output showed promise. Gross value added from industry is forecast to accelerate to approximately 8 percent from 7.3 percent, with most manufacturing sub-sectors posting gains despite elevated raw material costs. Electricity generation benefited from higher temperatures and the delayed monsoon onset, while construction activity data pointed to positive momentum.

Manufacturing's resilience surprised some observers. Listed company earnings reports revealed that profit growth held steady even as raw material expenses jumped, a feat made possible by strong sales growth that allowed firms to maintain margins. Gaura Sen Gupta, chief economist at IDFC FIRST Bank, attributed this to the ability of manufacturers to pass through costs without crushing demand. Investment activity also remained robust, supported by sustained capital expenditure from both the central government and state governments.

Looking ahead, the outlook darkens. The Reserve Bank projects that growth will ease to 6.7 percent across the full fiscal year ending March 2027, down from 7.7 percent in the year just completed. More concerning, the central bank expects a trough of 6.4 percent in the July-September quarter—a period already underway. Geopolitical tensions in West Asia and continuing uncertainty around the monsoon pattern pose material downside risks to these forecasts. Nominal GDP growth, by contrast, is expected to accelerate to around 13 percent, driven primarily by higher inflation in wholesale and producer prices rather than real economic expansion. The economy, in other words, faces a narrowing window before external and weather-related pressures begin to bite more deeply.