India’s economy has hit a new high, with its GDP surging to 7.8% in the first quarter of the 2025-26 fiscal year. This marks the fastest growth in five quarters, exceeding all forecasts and demonstrating the economy’s resilience despite global economic challenges.
The impressive performance was driven by a strong showing in key sectors:
- Services: The services sector led the charge, expanding by an impressive 9.3%. All major segments, including trade, transport, hotels, finance, and real estate, contributed to this robust growth.
- Manufacturing: The manufacturing sector also saw significant expansion, growing by 7.7%, a four-quarter high. This was bolstered by lower input costs and increased production.
- Agriculture: Agriculture recorded a solid 3.7% growth, thanks to a favorable monsoon season and improved crop output.
Cautious Optimism Amidst Headwinds
While the numbers are a cause for celebration, economists remain cautiously optimistic. The Chief Economic Advisor, V Anantha Nageswaran, has retained the full-year growth forecast at 6.3–6.8%, noting that risks from new tariffs imposed by the US are unlikely to be significant.
However, some analysts have raised concerns about potential challenges, including:
- Trade Tensions: The impact of reciprocal and penal tariffs on exports could slow growth in the coming quarters.
- Fiscal Management: Subdued tax revenue performance, particularly a 4.3% contraction in direct taxes, suggests a need for improved fiscal support and tax collection efforts to sustain momentum.
In summary, India’s strong start to the fiscal year provides a solid foundation, but continued fiscal support and careful management of global trade challenges will be crucial for maintaining this growth trajectory.