India GDP growth data Highlights: Indian economy grows at 7.8% in Q1 FY 2025-26; beats estimates

“India’s first quarter GDP numbers have once again surprised on the upside, with growth coming in substantially stronger than expected. At 7.8%, India remains the fastest growing major economy in the world. The picture is one of balanced momentum: on the supply side, manufacturing and construction are expanding at nearly 8%, while services are soaring above 9%—and but for the flood-induced setback to mining, the outcome would have been even stronger. On the demand side too, the story is broad-based, with private consumption and investment both rising by 7–8% and government spending by close to 10%. This reflects the stellar performance of the Indian economy and its clear outperformance against peers in an uncertain global environment.

Of course, risks remain, most notably the recent 50% U.S. tariff on Indian exports. Yet, with reforms gaining traction and inflation staying modest, India continues to stand out as the most compelling macro story in a gloomy world. Growth for the full year is still likely to average around 6.5%, even after factoring in tariff headwinds, while nominal GDP growth in the high single digits supports corporate earnings expansion of 11–13%. India’s macro strength provides a robust foundation for the equity market outlook,” says Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Wealth Limited.

"The sharply higher-than-expected first-quarter GDP data provides a reasonable upside to our earlier full-year estimate of 6.2%.

"However, we remain fairly cautious on the way ahead amid expected slowdown in exports from higher tariffs along with deferring in production ahead of GST rate cuts.

"We expect some policy interventions to help offset the adverse impact of the tariff impact on exporters,” says Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.

"The super healthy GDP growth print in the first quarter has gotten a temporary boost from extremely soft deflator, front-loaded government spending (unlike last year), along with front-loaded exports to the US. Some of these factors will reverse as we move ahead.

Besides, the effective macro hit from the 50% tariff imposition will start to feed through exports and have a domino effect on employment, wages and private consumption. This could further dampen private investment outlook and hinder growth,

"However, on the face of it, softer deflator effect and some consumption buffer from GST cuts could offset the hit in real GDP growth as we move to calendar year 2026,” says Madhavi Arora, Lead Economist, Emkay Global.

Real GVA in Q1 of FY 2025-26 is estimated at ₹44.64 lakh crore, against ₹41.47 lakh crore in Q1 of FY 2024-25, registering a growth rate of 7.6%. Nominal GVA in Q1 of FY 2025-26 is estimated at ₹78.25 lakh crore, against ₹71.95 lakh crore in Q1 of FY 2024-25, showing a growth rate of 8.8%.

* Government Final Consumption Expenditure (GFCE) has bounced back, registering 9.7% growth rate in Nominal terms during Q1 of FY 2025-26, over the growth rate of 4.0% in Q1 of FY 2024-25
* Real Private Final Consumption Expenditure (PFCE) has reported 7.0% growth rate during Q1 of FY 2025-26 as compared to the 8.3% growth rate in the corresponding period of previous financial year.
* Gross Fixed Capital Formation (GFCF) has recorded 7.8% growth rate at Constant Prices, over the growth rate of 6.7% in Q1 of FY 2024-25.

* Agriculture and Allied Sector has observed the Real GVA growth rate of 3.7%, as compared to the growth rate of 1.5% registered in Q1 of last financial year.
* Secondary Sectors, prominently Manufacturing (7.7%) and Construction (7.6%) Sector has registered above 7.5% growth rate at Constant Prices in this quarter.
* Mining & Quarrying (-3.1%) and Electricity, Gas, Water Supply and Other Utility Services Sector (0.5%) has seen moderated Real growth rate during Q1 of FY 2025-26.
* Tertiary Sector (9.3%) has recorded substantial growth rate at Constant Prices in Q1 of FY 2025-26, over the growth rate of 6.8% in Q1 of FY 2024-25.

Real GDP or GDP at Constant Prices in Q1 of FY 2025-26 is estimated at ₹47.89 lakh crore, against ₹44.42 lakh crore in Q1 of FY 2024-25, registering a growth rate of 7.8%. Nominal GDP or GDP at Current Prices in Q1 of FY 2025-26 is estimated at ₹86.05 lakh crore, against ₹79.08 lakh crore in Q1 of FY 2024-25, showing a growth rate of 8.8%.

Real GDP has been estimated to grow by 7.8% in Q1 of FY 2025-26 over the growth rate of 6.5% during Q1 of FY 2024-25.

"India’s comparative strengths, its young and skilled workforce, robust saving and investment rates, and relatively sustainable debt profile will help sustain high growth even in a volatile global environment. By building resilience and advancing capabilities in critical technologies, India is well-placed to move closer to its Viksit Bharat aspirations by 2047," says DK Srivastava, Chief Policy Advisor, EY India.

"Prospects of external demand, however, remain uncertain amidst ongoing tariff announcements and trade negotiations. The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook," said RBI in its latest monetary policy review

“India is prioritizing fiscal consolidation, demonstrating the government's political commitment to deliver sustainable public finances, while maintaining its strong infrastructure drive.

Robust economic expansion is having a constructive effect on India's credit metrics, and we expect sound economic fundamentals to underpin growth momentum over the next two to three years. In addition, monetary policy settings have become increasingly conducive to managing inflationary expectations.

We therefore raised our sovereign credit ratings on India to 'BBB' from 'BBB-'. The outlook is stable,” said S&P.

"In terms of growth, the Indian economy is the most dynamic, leading the world economy and all other major economies by a significant margin. Its growth is 2.3 times that of the US in 2024. In subsequent years, however, India’s growth is projected to be in the range of 3.1 to 3.6 times that of the US. If beyond 2030, India and the US maintain average growth rates of 6.5% and 2.1%, respectively, during 2028 to 2030 as forecasted by the IMF, India may surpass the US economy in terms of 2021 PPP-based international dollars in 2038," says EY in its Economy Watch.

The Indian economy presumably experienced a deceleration during April-June as sluggish consumer spending in cities and reduced private sector investments affected overall expansion. The situation could worsen in upcoming quarters, particularly impacting exports such as textiles, footwear, chemicals and food products.

The US administration's decision on Wednesday to increase tariffs on Indian products to up to 50% - matching Brazil's rate and marking the highest amongst US trade partners - was attributed to India's Russian oil purchases. Economic analysts suggest this action could negatively impact India's economic growth and employment levels.

Economic experts are concerned that extended high tariffs imposed by the United States could negatively impact India's economic expansion in subsequent periods, as export activities decrease and reduce India's potential to emerge as a manufacturing alternative to China.

"If it sticks for a year, GDP growth can slide by 0.7 percentage point, with much of the burden falling on labour-intensive sectors such as jewellery, textiles, and food items," Pranjul Bhandari, chief economist at HSBC, said in a note.

Agriculture and services sectors are projected to be the primary growth catalysts. According to the Union Bank of India report, Agricultural GVA growth is expected to reach 6 per cent, increasing from 5.4 per cent in the previous quarter. Services GVA is forecasted to grow by 7.8 per cent, driven by public administration (10.2 per cent) and financial services (8.8 per cent).

The industrial sector shows signs of deceleration, with growth declining to 4.9 per cent from 6.5 per cent in Q4 FY25.

The report indicates manufacturing growth at 4.1 per cent, whilst construction maintains robust progress at 10.1 per cent. Mining and electricity sectors are expected to experience negative growth of 2.5 per cent and 2.0 per cent, respectively.

The GDP-GVA differential is predicted to reduce to 0.29 per cent from 0.62 per cent in Q4 FY25, possibly due to advanced subsidy disbursement despite reduced indirect tax collection.

Union Bank of India maintains its FY26 growth projection at 6.3 per cent, whilst warning that growth might fall below 6 per cent in following quarters, considering potential risks from US tariff implications and slower investment recovery.

According to a Union Bank of India (UBI) report, India's economy is projected to expand by 7 per cent in the initial quarter of financial year 2026, showing improvement from 6.5 per cent growth recorded in Q1 FY25.

The study indicates that the Gross Value Added (GVA), which calculates the total output of goods and services in the economy or industry, is expected to reach 6.7 per cent. This represents a slight uptick from 6.5 per cent in the corresponding period last year, though marginally lower than the 6.8 per cent achieved in Q4 FY25.