India's GDP growth rises to 7.8% in Q1, beats estimates

Services sector growth surged to 9.3% in the first quarter of the current financial year from 6.8% recorded in the corresponding period of the previous year.

New Delhi: India's economic growth rose to a five-quarter high of 7.8 per cent in the April-June period, beating the Reserve Bank of India and other estimates, driven by a robust expansion in services and manufacturing sectors, according to the National Statistics Office (NSO) data released on Friday.

Services sector growth surged to 9.3 per cent in the first quarter of the current financial year from 6.8 per cent recorded in the corresponding period of the previous year. Manufacturing sector growth quickened to 7.7 per cent while construction activities posted a year-on-year growth of 7.6 per cent during the quarter under review.

The Q1 economic growth number is sharply higher than 6.5 per cent expansion predicted by the RBI. Estimates by other institutions were even lower.

Chief Economic Adviser V Anantha Nageswaran expressed hope that the full financial year GDP growth is likely to be in the range of 6.3 per cent to 6.8 per cent, despite the tariff and other challenges.

"While there is some uncertainty due to tariff-related concerns, in general conversations are going on and we see some kind of a resolution in the not so distant future,” he said.

Real GDP or GDP at constant (2011-12) price in Q1 was estimated at Rs 47.89 lakh crore, against Rs 44.42 lakh crore in the corresponding period of the previous year, registering a growth of 7.8 per cent. 

Nominal GDP or GDP at current prices in Q1 of 2025-26 is estimated at Rs 86.05 lakh crore, against Rs 79.08 lakh crore in Q1 of 2024-25, showing a growth of 8.8 per cent. The difference in real and nominal GDP number is because of inflation.

The GDP deflator, a proxy for capturing inflation at the economy level, stood at a 23-quarter low of 0.9 per cent year-on-year during the quarter under review.

"The robust GDP numbers for Q1, pleasantly higher than estimated consensus note, is a tight hit on the rhetoric mimicking dead economy jibes. The Indian economy is alive and kicking well, largely unfettered by noise," said Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.

According to analysts, higher government capital expenditure and ramp-up exports ahead of the implementation of the US tariff helped boost GDP growth during the first quarter of the current fiscal.

“Increased frontloading of capital expenditure by the states and the Centre (combined at 27.8 per cent on-year during the quarter) played a major role in supporting growth. A ramp-up in exports prior to the imposition of the US tariff hikes also helped," said Dipti Deshpande, Principal Economist, Crisil.

However, India’s export advantage would fade in the coming quarters because of the 50 per cent tariff hikes imposed by the US. Alongside, a broader global slowdown triggered by the tariff actions could further dampen external demand, Deshpande added.

The government consumption expenditure jumped to 7.4 per cent yoy in the first quarter of the current fiscal bouncing back from a contraction of 1.8 per cent year-on-year recorded in the previous quarter.

The exports growth (goods and services) increased to 6.3 per cent April-June quarter from 3.9 per cent in the previous three-month period. The growth in exports was led by services.