India’s economy grew at a sharp 7.8 percent in the April-June quarter of FY26, hitting a five-quarter high and beating all market expectations, according to data released by the Ministry of Statistics on Friday. The strong numbers were mainly driven by robust services activity and steady support from manufacturing and agriculture.
This is the second straight quarter of better-than-expected growth. In January-March, GDP had risen 7.4 percent, while the first quarter of FY25 had seen 6.5 percent growth. The Reserve Bank of India (RBI) had forecast growth to slow to 6.5 percent in April-June, but the actual outcome was far higher, surprising both policymakers and analysts.
Economists said the higher growth will cushion the Indian economy against challenges such as the 50 percent tariff imposed by the United States on Indian goods earlier this month. “Growth was expected to be strong this quarter, but this performance has gone beyond expectations,” said Madan Sabnavis, Chief Economist at Bank of Baroda.
The services sector remained the biggest growth driver, expanding 9.3 percent — its fastest pace in two years. Trade, hotels, transport and communication grew 8.6 percent, while financial, real estate and professional services rose 9.5 percent. Public administration and defence activity surged 9.8 percent, reflecting higher government spending. Overall Gross Value Added (GVA), considered a more accurate measure of economic activity, stood at 7.6 percent, a six-quarter high.
Agriculture grew steadily at 3.7 percent, more than double the pace of the same quarter last year. Manufacturing activity also accelerated, rising 7.7 percent compared to 4.8 percent in January-March. However, mining and quarrying contracted due to heavy rains, while construction slowed to 7.6 percent, a nine-quarter low. Utilities such as electricity and water supply grew only 0.5 percent because of lower demand during the unusually wet season.
Private consumption — which makes up more than half of India’s GDP — rose 7 percent, slightly lower than last year’s 8.3 percent but higher than 6 percent in the previous quarter. Investments grew by 7.8 percent, while government spending rebounded strongly, rising 7.4 percent after shrinking in the January-March period.
Analysts said that the impressive GDP figures were helped by low inflation, which kept real growth higher. However, nominal GDP growth, which does not adjust for inflation, slowed to 8.8 percent — the lowest in three quarters.
Despite external risks, experts remain positive on India’s outlook. “With reforms gaining traction and inflation staying modest, India continues to stand out as the most compelling macro story in a gloomy global environment,” said Sujan Hajra, Chief Economist at Anand Rathi Financial Services. He added that full-year growth is likely to average around 6.5 percent, with corporate earnings expected to rise by 11 to 13 percent.
The government has already announced reforms to support growth, including GST rationalisation and tax cuts under the new income tax regime. With services booming, manufacturing picking up, and investments holding steady, India looks set to remain one of the fastest-growing major economies in the world.
