New Delhi, Aug 30 (PTI) Pinning hopes on underlying resilience of the Indian economy, Chief Economic Adviser (CEA) V Anantha Nageswaran on Saturday said the high growth momentum exhibited in the first quarter of the current fiscal is expected to continue in the coming quarter as well, with a downward bias emanating from high US tariffs.

The Indian economy reported a stronger-than-expected 7.8 per cent growth in April-June, its fastest pace in five quarters.

"I think the first quarter numbers for the fiscal year were definitely better than expected. A lot of people attributed the fact that the GDP deflator was much weaker this year compared to last year… in some sense, the GDP deflator being on the weaker side was a good thing and was not an unknown aspect. That was factored into the consensus expectations of Indian economists in the private sector.

"Yet the GDP growth number for the first quarter in the current fiscal year was much better than expected…it attests the underlying resilience of the Indian economy in general and the lagged effects of various initiatives that the government has been undertaking since its beginning in 2014 and more so in the last two Budgets continued its momentum in the second fiscal quarter as well," Nageswaran told PTI.

Further elaborating, he said, the trade impasse with the United States is continuing for the moment, so there will be some impact in the second quarter, as increased tariffs on Indian shipments took effect in August.

A steep US tariff of 50 per cent on goods from India took effect on August 27. The tariffs – among the highest in the world – include a 25 per cent penalty for buying crude oil from Russia. On August 7, the Trump administration enforced a 25 per cent tariff on Indian goods, citing India’s persistent oil imports from Russia and long-standing trade barriers.

"There were two parts of the US tariffs. Both will have an impact in the second quarter and possibly a little bit into the beginning of the calendar fourth quarter or the fiscal third quarter," he said.

But, he said, "I think some of these tariff measures will be short-lived and there are a lot of conversations going on between India and the US government. And I do believe that a resolution will be found sooner rather than later.

He exuded confidence that the tariff impact on growth activities will be contained to the second quarter, and maybe at most a part of the third quarter.

Besides, he said "they will also be compensated for by the GST tax relief that is coming up and the impact of the very good monsoon we have had and agricultural production should start doing better than what we saw in the fiscal first quarter.

The agriculture sector recorded a 3.7 per cent growth, up from 1.5 per cent in the April-June period of 2024-25, as per the data released by the National Statistics Office (NSO) on Friday.

The Economic Survey tabled in parliament in January had projected real economic growth of 6.3-6.8 per cent for FY26.

The gross domestic product (GDP) growth of 7.8 per cent in the first quarter of the ongoing fiscal year was mainly driven by good showing by the farm sector, and also helped by services like trade, hotel, financial and real estate.

The previous highest pace of growth in the country's GDP was recorded at 8.4 per cent during January-March 2024, as per the data.

India remains the fastest-growing major economy, as China's GDP growth in the April-June period was 5.2 per cent. PTI DP DP MR

Trade tariffs on Indian exports could temporarily reduce growth, but GST relief and stronger agriculture should contain impact. High external tariffs imposed by the United States create temporary downward pressure on Indian growth by raising export costs and affecting exposed sectors; these measures are expected to impact the second quarter and possibly spill into the early subsequent quarter, while bilateral negotiations may resolve measures that could be short lived. Domestic mitigation through anticipated GST tax relief and stronger agricultural output from a good monsoon is expected to offset the tariff shock, supporting the services and farm sectors that drove recent quarterly GDP expansion and helping sustain overall growth momentum.