India's Economic Resurgence: An Unexpected Upswing Amidst Global Challenges

India's economy unexpectedly expanded by 7.8% year-on-year in the April-June quarter, surpassing the predictions of economists who had forecast a slowdown. This growth acceleration comes amid potential challenges from U.S. tariffs impacting exports and employment, creating concerns about sustainability in the upcoming quarters.

The surprising growth figures have been buoyed by softer deflator effects, front-loaded government expenditure, and early exports to the U.S., according to Madhavi Arora, lead economist at Emkay Global, Mumbai. These factors, while temporarily beneficial, may reverse as tariffs begin to impact exports and broader macroeconomic factors take hold.

Amidst uncertainty over persistent U.S. tariff impacts, economists like Upasna Bhardwaj from Kotak Mahindra Bank and Aditi Nayar from ICRA highlight that policy interventions will be crucial. The growth laser focus remains on GST rationalisation and mitigating tariff effects to sustain the positive momentum into FY2026.

(With inputs from agencies.)