India’s GDP Grows 7.8% in Q1, Highest in Five Quarters, Will Maintain Momentum Despite Tariffs | IMF

India’s economy grew at a strong pace of 7.8 per cent in the April-June quarter of FY 2025-26, official data from the Ministry of Statistics showed on Friday. This marks the fastest growth in five quarters, up from 6.5 per cent in the same period of last year, and well above the Reserve Bank of India’s earlier estimate of 6.5 per cent.

The rebound was led by better farm output, stronger manufacturing, and a buoyant services sector. Agriculture expanded by 3.7 per cent, a clear improvement from 1.5 per cent last year when erratic monsoon rains had hurt production. Manufacturing rose 7.7 per cent and construction grew 7.6 per cent, reflecting strong demand for housing and infrastructure. Services, which make up the largest share of the economy, jumped 9.3 per cent compared to 6.8 per cent in the same quarter last year.

Investment activity also strengthened. Gross Fixed Capital Formation, which tracks investments in infrastructure, machinery, and housing, rose 7.8 per cent compared to 6.7 per cent a year ago. Government spending was another big driver, with final consumption expenditure growing 9.7 per cent in nominal terms, more than double the 4 per cent growth recorded in the April-June quarter of 2024.

While rural demand stayed firm, supported by infrastructure spending on highways, railways, ports, and airports, private consumption grew at a slower pace than last year. Experts say easing inflation and higher employment are likely to boost household spending in the coming months.

RBI Governor Sanjay Malhotra said that supportive conditions such as an above-normal monsoon, lower inflation, rising capacity utilisation, and favourable financial conditions are expected to sustain momentum. “Supportive monetary, regulatory and fiscal policies, including robust government capital expenditure, should also boost demand. The services sector is likely to remain buoyant with continued growth in construction and trade,” he added.

Industry bodies welcomed the performance. Jyoti Vij, Director General of FICCI, said the growth is the result of a strong foundation built over the past few years. “The 7.8% GDP growth adds to the confidence in the economy,” she noted.

Nilesh Shah, Chairman of the Tourism Committee at GCCI, pointed out that the tourism sector recorded 8.6 per cent growth in the first quarter, reflecting rising domestic and international travel.

The broader outlook for India also remains upbeat. The International Monetary Fund has projected India to remain the only major economy expected to grow above 6 per cent in 2025-26, even as global growth faces headwinds from trade disruptions and tariff tensions.

Beyond quarterly numbers, structural trends continue to support India’s long-term growth story. Over the past decade, the economy has created 17 crore jobs, with women playing a bigger role. Female employment has surged by 96 per cent in rural India and by 43 per cent in urban areas. By 2030, India is expected to become the world’s third-largest economy with a projected GDP of $7.3 trillion.

With inflation cooling, employment on the rise, and consumer sentiment holding strong, economists expect private consumption to gather pace, giving an additional push to growth. If these trends hold, India is well-placed to stay ahead of most global peers in the years to come.