India’s economy grew a strong 7.8 per cent in the June quarter of FY27 despite the West Asia crisis, which many economists and analysts say was a ‘positive surprise.” But they also flagged pockets of concern beneath the headline number including inflation, agriculture performance due to weather related uncertainties and looming risks from geopolitical tensions.A strong GDP growth rate in the first quarter of FY27, despite it being a quarter of peak West Asia crisis, is a “positive surprise,” noted Rajni Thakur, Chief Economist at L&T Finance. “While risks from global uncertainties and El Nino remain on the horizon, strong capex, robust credit growth, and continued policy support should sustain economic activities for the rest of the fiscal year and drive it above the 7 per cent level,” Thakur said.India’s GDP growth moderated to 7.8 per cent in Q1 FY2027 from the upward revised 8.6 per cent in Q4 FY2026, while exceeding ICRA’s estimate of 7 per cent for the quarter, pointed out Aditi Nayar, Chief Economist, ICRA Ltd. “As we had anticipated, the GVA growth also decelerated between these quarters, while printing above the 8 per cent-mark in Q1, and exceeding the GDP growth for the quarter. Overall, economic activity remained robust during the April-June quarter despite the adverse impact of the West Asia conflict on some sectors as well as the unfolding impact of the uneven monsoon,” she saidInvestment activity provided a significant thrust, with Gross Fixed Capital Formation (GFCF) surging 11.9 per cennt—the highest on the current series. An executive report by SBI Capital Markets (SBICAPS) pointed out that capital expenditure is expanding beyond public balance sheets, driven by strong non-food bank credit growth and high industrial capacity utilisation. However, private consumption may face headwinds later in the fiscal year due to high prices and muted rural demand, it warned.The domestic economy has demonstrated resilience in the first quarter and there could be some growth moderation in the coming quarters, noted Rajani Sinha, Chief Economist, CareEdge Ratings. “The looming global risks from geopolitical tensions and trade policy uncertainty are expected to weigh on the growth outlook. On the domestic front, weather-related uncertainties stemming from the El Niño conditions pose a threat for agricultural output and yields,” Sinha said. Furthermore, elevated domestic inflation, particularly food inflation, could pose a headwind to domestic demand. “Overall, we expect the economy to hold up well. Buoyed by the better-than-expected growth momentum in Q1, we have raised our FY27 growth projection to 7.3 per cent from 7 per cent earlier,” she added.Published on August 31, 2026