“Beating all predictions, India’s GDP grows 7.8% in the first quarter of FY26. We are a global growth engine fuelled by reforms and resilience,” the Union Minister of Commerce & Industry said in a post of X, formerly Twitter, on Saturday (30 August 2025).

India has grown at the fastest pace in at least a year, surprising the likes of economists and GDP pundits alike, but that growth isn’t without merit. In fact, it’s short-lived.

Five-Quarter High

The super healthy GDP growth rate in the first quarter has gotten a temporary boost from front-loaded government spending—unlike last year due to 2024 Lok Sabha elections—along with front-loaded exports to the US before the 50% tariffs came in effect, Madhavi Arora, lead economist at Emkay Global, said in a note on Friday.

India’s economy unexpectedly expanded 7.8% year-on-year in the April-June quarter, picking up from 7.4% in the previous three months, according to government data released on Friday. With that, India remains the fastest growing major economy in the world, as China’s GDP growth rate came in at 5.2% and United States’ at 3.3% in the three months to 30 June.

Economists polled by Reuters had forecast India’s GDP growth rate to ease to 6.7% in Q1, and that the economy would continue to slow due to 50% US tariffs on exports. Instead, the fourth largest economy in the world has expanded at the fastest pace since January-March 2024, when it grew 8.4% year-on-year.

The Growth Is Fleeting

To be sure, these effects are, at best, transient.

Many economists expect a slowdown in growth in the upcoming quarters as government spending wanes and external pressures take over. The upcoming GST reforms may cushion the blow, but only so much.

The 50% US tariffs are set to play a spoilsport in the July-September quarter, and thereafter, according to economists, with GDP growth likely to be hit by up to 1 percentage point. Urban consumption remains subdued, and private capex is showing signs of weakness despite higher public spending. A low inflation rate—though beneficial—also implies modest nominal GDP growth of around 8%.

“The first-quarter numbers have surprised us all,” Sachidanand Shukla, group chief economist at Larsen & Toubro Ltd., told Reuters. “However, the biggest takeaway is that one should not be carried away by the numbers. This is the ceiling when it comes to growth numbers and it will trend down through the rest of the year.”