India’s economy likely maintained solid growth in the June quarter, buoyed by optimism surrounding a potential trade deal with the United States, though prospects have since dimmed as the country faces the highest US tariffs in Asia.
According to a Bloomberg survey of 37 economists, India’s GDP likely grew 6.7% in the three months to June, marking the first quarter of the financial year.
This is slower than the 7.4% expansion seen in January–March but higher than the 6.5% growth recorded a year earlier.
Growth in the first fiscal quarter is usually softer after a strong year-end period.
Exporters accelerated shipments to the US after President Donald Trump temporarily suspended reciprocal tariffs, providing a boost to the quarter’s growth. Early monsoon rains encouraged sowing and strengthened rural demand, further supporting the economy.
However, these gains may be short-lived, as growth is expected to slow in the next quarter with the reimposition of US tariffs on Indian goods, Bloomberg reports.
“We’ve seen significant front-loading on the export side,” said Sonal Varma, economist at Nomura Holdings Inc.
Friday’s data could reveal sluggish mining and power demand along with slower manufacturing due to a decline in auto sales, according to Bank of America economists Rahul Bajoria and Smriti Mehra.
They also highlighted a probable gap between GDP and gross value added, another key measure of economic performance, since reduced subsidies and higher taxes are likely to weigh on GVA.
Varma projects GDP growth of around 6.9% for the April–June quarter but anticipates a sharp slowdown to below 6% in the second half of the fiscal year starting in October.
The slowdown is driven by 50% US tariffs that came into effect this week, which threaten sectors like textiles, footwear, and jewellery and are estimated by Citigroup Inc. to reduce annual growth by 0.6–0.8 percentage points.
Growth is encountering “headwinds” from US tariffs and weaker global demand, which are expected to weigh on India’s export-oriented and labour-intensive sectors, according to Indranil Pan, chief economist at Yes Bank Ltd.
However, there is optimism that growth could receive a “push” from recent measures announced by the Narendra Modi government aimed at stimulating demand, he added.
India’s economy is primarily fuelled by domestic demand rather than exports, making consumer and business confidence crucial for stronger growth. Private consumption accounts for roughly 60% of GDP, and although the US is India’s largest export market, with shipments totalling $87.4 billion in 2024, this represents only about 2% of India’s overall GDP.
To stimulate demand and soften the impact of US tariffs, the government has unveiled plans to simplify the country’s complex Goods and Services Tax (GST), which is expected to lower prices and provide relief for consumers and small businesses.
IDFC First Bank estimates that this tax reform could boost nominal GDP growth by 0.6 percentage points over 12 months.