GDP growth at 7.8%: What Trump doesn’t get about India’s 'dead' economy

The data doesn’t care about Twitter tirades or Truth Social posts. India’s April–June GDP growth data, released Friday by the National Statistics Office (NSO), showed an economy with surprising resilience: fueled by solid farm output, strong private spending, a services boom, and front-loaded government expenditure.

Defying Trump’s “dead economy” jibe, India’s GDP expanded 7.8% year-on-year in the April–June quarter - its fastest growth in five quarters, official data showed Friday. The figure outpaced market forecasts of 6.7% and topped the previous quarter’s 7.4%, underscoring India’s status as the world’s fastest-growing major economy.


Why it matters
The data underscores the strength of India’s domestic economy, powered by services, manufacturing, and farm output. Prime Minister Narendra Modi’s government is pushing to make India a global manufacturing hub at a time when investors are reassessing supply chain dependence on China.


Yet, the Trump's tariff escalation threatens to derail India’s export engine - a key pillar of its growth story - and poses risks to jobs and private investment. According to some analysts, the US duties could shave as much as 0.6–0.8 percentage points off India’s growth over the next year.

The big picture
Sectoral performance:

• Agriculture expanded 3.7%, up from 1.5% in the same quarter last year, aided by a solid sowing season.
• Manufacturing grew 7.7%, nearly flat compared to last year but well above the 4.8% seen in the prior quarter.
• Services led the way with a robust 9.3% expansion, boosted by trade, hotels, transport, and financial services.

Demand drivers:

• Private consumption, which accounts for nearly 60% of GDP, rose 7.0% - helped by rural spending, demand for durables, and tax relief.
• Government expenditure jumped 9.7% in nominal terms, reversing a contraction in the previous quarter.
• Capital formation rose 7.8%, though economists flagged hesitancy among private firms amid tariff uncertainty.
• Nominal slowdown: Real GDP may be strong, but nominal GDP (factoring in inflation) slowed to 8.8% from a long-run average near 11%. That could weigh on corporate earnings and tax revenues

What they’re saying:
Here are some comments given to Reuters by experts.

• Aditi Nayar, ICRA: “Amidst continuing tariff-induced uncertainty for exports and private capex, we fear that growth will taper off in the subsequent quarters, notwithstanding the balm offered by GST rationalisation.”
• Madhavi Arora, Emkay Financial: “The effective macro hit from the 50% tariff imposition will start to feed through exports and have a domino effect on employment, wages and private consumption. This could further dampen private investment outlook and hinder growth.”
• Capital Economics: The “surprise acceleration” means India is still “on course to expand by a world-beating 7% this year, despite the upcoming hit from punitive US tariffs.”
• Radhika Rao, DBS Bank: “Markets will switch focus to catalysts for the rest of the year, which faces an interplay of tariff-related impact, GST rationalisation, and government spending trend with an eye on revenues.”
• Suja Hajra, Anand Rathi Group: “Risks remain, most notably the recent 50% US tariff on Indian exports. Yet, with reforms gaining traction and inflation staying modest, India continues to stand out as the most compelling macro story in a gloomy world.”

Zoom in: Export front-loading
Analysts say part of the Q1 boost came from exporters rushing shipments to the US before Trump’s tariff deadlines. Bloomberg reported this “front-loading effect” temporarily padded growth, but the effect will fade as the full brunt of tariffs takes hold in the second half of the fiscal year.


Between the lines

• The tariff dispute stems from India’s continued purchases of discounted Russian oil - which Washington argues helps finance Moscow’s war in Ukraine. Trump responded by doubling duties to 50% this week, placing India alongside Brazil as one of the hardest-hit US partners.
• New Delhi has so far refrained from retaliatory measures but is lobbying Washington for a review of the duties. Exporter groups estimate that tariffs could hit 55% of India’s $87 billion in US-bound shipments, giving an edge to rivals such as Vietnam, Bangladesh and China.

The government’s response:

• The government has pledged targeted support for affected sectors and tax cuts to cushion domestic demand.
• Earlier this month, it slashed consumption taxes, which are expected to take effect in October, just ahead of the festive season. IDFC First Bank estimates the cuts could lift nominal GDP by 0.6 percentage points over 12 months.
• Officials are also betting that lower inflation and rationalisation of GST rates will keep consumer demand resilient.

What’s next

• Reserve Bank of India: The central bank projects 6.5% growth for FY26 and is expected to hold rates steady in its October review. Analysts say the stronger Q1 print rules out near-term easing.
• Exports outlook: Economists fear a significant slowdown once the tariffs hit full force, with knock-on effects on employment, wages, and private consumption.
• Global position: Even with tariff headwinds, India’s growth is outpacing China, which posted 5.2% growth in the same quarter. Investors continue to view India as a key alternative to China in supply chains.

(With inputs from agencies)