India Economic Growth Beats Forecasts, but Tariff Concerns Cloud Outlook

India's economy grew at a faster pace than expected in the April to June quarter, official data showed Friday, although US tariff concerns have clouded the outlook for the remaining fiscal year.

Gross domestic product grew 7.8 percent in the three months that ended June 30, from the same period a year earlier, statistics ministry data showed.

Growth increased from the 7.4 percent recorded in the previous quarter, beating market expectations of 6.7 percent.

The June quarter's strong performance was partly due to higher government spending, decent manufacturing sector growth and improved consumer sentiment.

Friday's reading reaffirms India's position as the fastest-growing major economy and will come as welcome news for Prime Minister Narendra Modi, who is trying to navigate through US President Donald Trump's harsh tariff blitz.

Trump has slapped 50-percent tariffs on most Indian products -- among the highest duty rates in the world -- as punishment for New Delhi's purchases of Russian oil which Washington claims helps finance Moscow's invasion of Ukraine.

Indian shipments to the US largely held up between April and July, mostly due to exporters front-loading goods to beat tariff deadlines and robust growth in exempted exports, such as iPhones.

But with the 50-percent tariffs having kicked in this week, experts are projecting a sharp fall in exports.

"Amidst continuing tariff-induced uncertainty for exports and private capex (capital expenditure), we fear that growth will taper off in the subsequent quarters," Aditi Nayar of credit rating agency ICRA said in a note this month.

The Global Trade Research Initiative, a New Delhi-based think-tank, estimates that if the harsh tariffs stick, India's exports could fall to about $49.6 billion in the current fiscal year -- a steep fall from the $86.5 billion in shipments recorded last fiscal year. – AFP/RSS