India sustains 7.8% growth amid US-Iran war through policy tweaks and RBI inflows

India recorded 7.8% real GDP growth in the first quarter of FY27, an investment-led expansion underpinned by a consumption boost after income up to Rs 12 lakh became tax-free and a major GST rate reduction in September 2025. To mitigate the US-Iran war’s impact on energy supplies, the government broadened crude sourcing, increasing Russian oil and U.S. LPG/LNG imports, and temporarily cut excise duties on petrol and diesel.

The Reserve Bank of India launched a foreign-currency deposit scheme that drew $136.38 billion, lifting foreign-exchange reserves to a historic $740.80 billion, enough for about 11 months of imports. Inflation remained within the RBI’s 2-6 % band, with CPI at 4.45% in July, while wholesale prices rose toward double digits. Analysts note the growth is concentrated in higher-income segments and warn that sustained crude-price rises could threaten the outlook, though the medium-term prospects are seen as resilient.