India's 7.8% GDP growth backed by buoyant high-frequency indicators

India’s economy grew faster than expected in the first quarter of fiscal 2027, with real GDP expanding 7.8% amid strong industrial activity and electricity consumption.

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The numbers that have come up are extremely positive. I don’t think the market had bet on a 7.8 per cent growth.

Rumki Majumdar, Deloitte India’s director and chief economist, told ANI that the April-June performance showed resilience despite uncertainty linked to the war, higher petrol and fertiliser prices, and the growing impact of El Nino. “The numbers that have come up are extremely positive. I don’t think the market had bet on a 7.8 per cent growth,” she said.

Several high-frequency indicators had already pointed to underlying strength. Capital expenditure and industrial production recorded strong gains, electricity consumption remained robust, and urban demand continued to support sectors such as travel and hospitality. Majumdar said flights were consistently booked, indicating that a large urban consumer segment was driving activity.

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If you look at some of the high frequency indicators also it had been pointing out. Say CAPEX or IIP has been one of the highest gains, and then electricity consumption has been pretty good. That kind of tells you that industrial production has been quite strong.

Rural demand, however, appeared to be moderating. Indicators for non-durable goods showed some tempering, suggesting challenges for rural consumption even as urban spending remained firm. “It’s not that the GDP number is completely out of line, many of the higher-frequency indicators were also pointing to the same thing: that there is a buoyant economy,” Majumdar said.

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You see the flights all being booked out all the time. So really there is a big segment of the population which is moving the economy, especially urban demand.

Data from India’s Ministry of Statistics and Programme Implementation put real GDP at 81.36 lakh crore rupees in the first quarter, compared with 75.46 lakh crore rupees a year earlier. Capital formation rose 11.9%, which Majumdar described as one of India’s highest levels. She expects private capital expenditure to gain further strength on the back of corporate revenue and sales, while the October-December quarter could receive additional demand from the festive season.

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Clearly private capex is likely to pull up the rest of the economy much stronger than what it has done so far.