New Delhi: India’s economy grew by 7.8% in the first quarter of FY26 (April–June), marking its strongest performance in five quarters and beating most analyst estimates. The growth was fuelled by robust expansion in the services and manufacturing sectors, signalling solid domestic demand despite global economic headwinds and rising trade tensions.
The better-than-expected performance was driven largely by a booming services sector, which grew 9.3% year-on-year. Public administration, financial services, and trade-related industries all recorded healthy gains, pointing to rising demand in urban areas and increased government activity.
Manufacturing, which had slowed in recent quarters, made a solid comeback with 7.7% growth, while agriculture expanded by 3.7%, boosted by a strong rabi harvest. Construction also held firm with 7.6% growth, though slightly down from earlier highs. However, not all sectors fared well — mining shrank by 3.1% and utilities grew just 0.5%, hit by early monsoon disruptions.
On the spending side, household consumption — a key driver of the economy — rose 7%, while government expenditure increased sharply by up to 9.7% in nominal terms. Investments, measured by Gross Fixed Capital Formation (GFCF), also rose 7.8%, suggesting strong infrastructure and capital spending.
Economists say the figures reflect underlying strength in India’s domestic economy. “It’s a strong start to the year and shows the economy is holding its own despite global headwinds,” said Madan Sabnavis, Chief Economist at Bank of Baroda. However, he warned that growth may moderate in the coming quarters, with full-year expansion likely closer to 6.5%.
One concern on the horizon is trade. Recent tariff hikes by the U.S. on Indian goods could impact exports and pressure small businesses. But for now, India appears to be weathering the storm.
Industry bodies such as ASSOCHAM and FICCI welcomed the data, calling it a reflection of India’s economic resilience. “This performance will boost investor and business confidence,” said a statement from PHDCCI.
Looking ahead, much will depend on how the monsoon plays out, how inflation is managed, and how global trade tensions evolve. However, for now, India’s economy has begun FY26 with unexpected strength and optimism.
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