India's economy expanded by 7.8% year-on-year in the quarter through March, according to official data released by the country's statistics ministry on Friday [1][2]. This growth rate exceeded market expectations, which had forecast a 7.2% increase [2]. For the full fiscal year ending in March, India's GDP growth reached 7.7%, up from 6.5% in the previous fiscal year [1]. The robust performance came despite the onset of the U.S.-Iran war, which has begun to impact the region [1].
Following the release of the stronger-than-expected GDP data, the Indian Rupee (INR) appreciated against major currencies, notably outperforming the Japanese Yen [2]. The INR gained 0.69% against the US Dollar, 0.61% against the Euro, and 0.82% against the Japanese Yen, according to a currency heat map provided in the report [2]. The USD/INR currency pair traded sharply lower at around 94.9500, remaining below the 20-day Exponential Moving Average (EMA) of 95.41, indicating a bearish near-term bias for the US Dollar against the Rupee [2].
Despite the positive GDP surprise, the Reserve Bank of India (RBI) has downgraded its growth outlook for the next fiscal year (FY 2026-27) to 6.6%, down from the previously anticipated 6.9%, citing an energy supply shock as a key factor [2]. The RBI kept the Repo Rate unchanged at 5.25% and warned of persistent high inflation risks [2]. Rising inflation is also highlighted as a looming risk for India's economy going forward [1].
Analysts note that while GDP data typically has a significant impact on the Indian Rupee, the effect may be limited this time due to the RBI's cautious stance and revised growth projections [2].
CONCLUSION
India's Q1 GDP growth surpassed expectations, driving notable appreciation in the Indian Rupee against major currencies. However, the RBI's downgraded growth outlook and warnings about inflation suggest caution for future economic momentum. Market participants should monitor inflation and regional developments for further impact.