NEW DELHI – Despite the impact of the initial phase of the war in the Middle East, the Indian economy grew by 7.8% year-on-year in the first quarter of the year. The figure was significantly higher than the growth forecasts made by economists surveyed by Reuters and Bloomberg (7.2% and 7.3% respectively), but showed a slight slowdown compared to the previous three months (+8% revised from the initial +7.8%). Private investments, agricultural production, and construction were three of the main drivers of growth.
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The National Statistics Office estimates that in the fiscal year ending last March 31, GDP grew by 7.7%, a slight increase compared to the 7.6% forecast made in February. «The repercussions of the conflict in the Middle East in March seem to have had a limited impact on economic growth,» explains Sakshi Gupta, chief economist at Hdfc Bank, adding, however, that growth will likely slow down starting from the April-June quarter.
Among leading observers, both from the public and private sectors, it is widely believed that the current year will see a setback. Before the outbreak of the war, the government’s chief economic advisor predicted growth between 7% and 7.4%, but the oil crisis is leading to a significant downward revision of expectations: according to forecasts released yesterday by the Reserve Bank of India, India will grow by 6.6% in the 12 months to March 31, 2027. In April, the estimate was 6.9 percent.
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India has been one of the economies hardest hit by the war with Iran, now in its fourth month, because the country is the world’s third-largest importer and consumer of oil and is heavily dependent on supplies from the Middle East, especially since the US government began imposing extra tariffs on New Delhi to discourage purchases of Russian crude.
Data published on Friday showed that construction activity grew by 8.4%, compared to 6.7% in the previous quarter. The growth in agricultural production, a sector that employs over 40% of the country’s enormous workforce, was 3.6%, compared to 1.7% recorded in the last three months of 2025. Private investments grew by 10.8%, up from 8.2% recorded in the quarter. Public spending also increased by 4.9%, compared to 4.6% in the previous quarter.
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