India's economy outpaced expectations in the April-June quarter of FY26, recording a robust 7.8% GDP growth, the fastest pace since Q4 of FY24, according to data released by the Ministry of Statistics on Friday.
Strong Momentum in Manufacturing and Services
The growth surge was powered by manufacturing (7.7%) and a resilient services sector, which expanded 9.3%. Within services, trade, transport, hotels, financial and real estate services, and public administration recorded significant gains. Agriculture also contributed with 3.7% growth, marginally below its recent average of 4.4%.
Official Outlook
Chief Economic Advisor V. Anantha Nageswaran said India's resilience in Q1 growth has validated the government's FY26 projections. "Despite reciprocal tariffs and penal duties imposed by the US, we are retaining our growth estimates for FY26 at 6.3-6.8%. The downside risks appear limited," he said.
Expert Views
- Barclays India: The better-than-expected GDP print has reduced the likelihood of forecast downgrades. With base effects in play for Q2, Barclays retained its FY26 growth outlook at 6.5%.
- Kotak Mahindra Bank: Its Chief Economist remained cautious, pointing to potential export slowdowns due to tariffs and deferred production ahead of GST rate cuts. Policy measures may be required to cushion exporters.
- Policy Advisory Experts: They flagged concerns over weak direct tax collections, which contracted by (-)4.3%, even as government expenditure surged. Capital expenditure grew 32.8%, and revenue expenditure rose 17.1% in April-July.
Fiscal Concerns and the Road Ahead
While robust infrastructure spending has supported growth, analysts warned that net exports remain a drag amid global trade headwinds. Experts urged the government to strengthen tax revenue performance while maintaining a capital expenditure-led fiscal strategy to sustain momentum.
Outlook
With Q1 results showing resilience, economists believe India is well-positioned to achieve 6.5%+ growth in FY26, though challenges from trade barriers and fiscal imbalances need careful management.
Official copy of the data released by the Ministry of Statistics has been attached
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