India's GDP growth moderated to 7.8% YoY in Q1 FY27 from an upwardly revised 8.6% in Q4 FY26, but comfortably printed above consensus expectations of 7.1-7.3%
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While India's GDP growth moderated to 7.8% YoY in Q1 FY27 from an upwardly revised 8.6% in Q4 FY26, it comfortably printed above consensus expectations of 7.1-7.3%. The composition appears encouraging. Investment and export growth clocked their fastest run-rates in the new series (both posting double-digit expansion), while private consumption remained broadly steady. The moderation was concentrated in government consumption and in inventory run-down. On the supply side, the secondary sector accelerated on manufacturing and utilities, offsetting a slower tertiary sector, where trade, hotels and transport gave up momentum after a strong Q4; services GVA nonetheless expanded 10.0%, a third consecutive double-digit print. Nominal GDP grew 10.3%, the fastest in eight quarters, as the implied deflator firmed to 2.3% from 0.5% earlier. Looking ahead, we expect the quarterly GDP trajectory to drift lower: the monsoon shortfall, an adverse H2 base as the GST impulse fades, lagged retail price catch-up, and likely rationalization of public capex all argue for moderation. Even so, the strength of the Q1 print and the resilience evident in early Q2 data prompt us to mark up our FY27 GDP growth forecast to 6.9% from 6.4% earlier. We also fine-tune our monetary policy call to 50 bps hike in H2 FY27 from 25-50 bps hike earlier.