One economic indicator after another is showing that on the whole, the Indian economy has weathered the storm that is the West Asia conflict and the resultant energy shock. The biggest proof of this may come on Monday (August 31), when the Ministry of Statistics and Programme Implementation (MoSPI) releases gross domestic product (GDP) data for the April-June quarter (Q1). GDP is the total monetary value of all final goods and services produced within a country’s borders during a specific period.According to the Reserve Bank of India (RBI), GDP growth in the quarter may be 7%. But economists from various banks and agencies think the headline growth figure may exceed the central bank’s forecast by at least half a percentage point, with some even of the opinion that growth may come in as high as 8%.“An upswing in GDP growth close to psychological 8% threshold in a quarter laden with impact of geopolitical tensions and spike in oil prices to an average $97/bbl is a positive surprise,” said Union Bank of India economists led by Kanika Pasricha. They think GDP growth in April-June will be 7.9%, “likely a blockbuster beating all odds”. The economy’s performance has been surprising on the upside for some time now, with the last three quarters seeing GDP growth rates of 8.3%, 8%, and 7.8%. Of the 50-plus indicators tracked by the State Bank of India — which estimates around 8% GDP growth in April-June — 86% of them accelerated in the quarter, up from 69% in April-June 2025.Underpinning the robust performance in April-June is the pace at which loans are being taken. We explain.The first quarter of a new financial year is usually the weakest in terms of corporate performance and demand for loans from lenders. Why? Because activity takes a breather after the hectic last quarter of the financial year and companies are busy making their plans for the year ahead.However, the first three months of 2026-27 has been the best for demand for bank loans in more than a decade.Story continues below this adRBI data shows outstanding non-food loans of banks were up 18.3% year-on-year as at the end of June. The last time bank loan growth was higher at the end of the first quarter of a financial year was way back in June 2012, when it was 18.7%.While some of the high growth in bank credit can be attributed to a change in the reporting format of the data to the last day of the month as well as the high wholesale inflation in April-June owing to the war in West Asia, there are solid underlying reasons driving demand for money.As at the end of June, bank loans to the industry were up 19.2% year-on-year, services 21.4%, and personal loans 15.8%. In June 2025, the corresponding growth rates were 6.3%, 8.8%, and 11.7%.The inflection pointAccording to Barclays economists Aastha Gudwani and Amruta Ghare, while demand for bank credit post the Covid-19 pandemic from industry has largely been lower than that from agriculture, services, and the retail sector personal credit, things changed in mid-2025. “…[C]ontinued acceleration over the past year in industry growth is now driven by ‘large’ industry bank credit: where pace has nearly risen 4x from 2% outstanding in June 2025 to 16.6% in June 2026.”Story continues below this ad“Overall, we are seeing a shift in credit offtake from personal loans towards industry and services, reflecting strong credit demand in the more productive sectors of the economy. Economic activity, and as a result credit growth, has held up despite uncertainties from the West Asia war,” Upasna Bhardwaj and Harsh Doshi, economists with Kotak Mahindra Bank, said in a report earlier this month.It is not just India that is seeing a pick-up in demand for loans, with the 8.5% growth in bank credit in Asia excluding China the highest in 18 years, according to Morgan Stanley. A broad-based pickup in loan growth in Asia excluding China. Source: Morgan Stanley “Surging capex, booming trade and the rise in PPI (Producer Price Index) inflation explain this acceleration in credit demand,” Morgan Stanley economists led by Chetan Ahya, the investment bank’s Chief Asia Economist, said last month. According to them, Asia is entering its “strongest industrial cycle since the 2000s” thanks to the “sustained, multi‑year rise in capex across AI and AI-related digital infrastructure spending, energy, defense and industrial supply chains”.Corporate performanceCompanies, large and small, are not just taking loans but also reporting solid financial results.Story continues below this adNewsletterFollow our daily newsletter so you never miss anything important. On Wednesday, we answer readers' questions.SubscribeIn April-June, sales of listed private non-financial companies rose by 19.4% year-on-year compared to 13.9% in the final quarter of 2025-26 and just 5.5% in the April-June 2025. More importantly, operating profits grew 19.3%, more than double the 9.8% increase reported in January-March and 7.3% in the year ago period. And this was despite the sharp 25.3% rise in raw material costs and 19.3% increase in power and fuel expenditure during the quarter due to the West Asia conflict.The above data is based on numbers compiled by the RBI for 3,247 listed non-government non-financial companies.“The robust growth in sales, notwithstanding the higher price scenario, suggests that the underlying growth momentum remains strong,” said Aditi Gupta, an economist at Bank of Baroda, adding that both consumption and manufacturing engines are fuelling growth.