India’s GDP Growth Hits 7.8% in Q1 FY26, Beating RBI’s Projection

India started the financial year 2025-26 on a strong footing, with the economy expanding faster than expected. Data from the Ministry of Statistics and Programme Implementation (MoSPI) showed that GDP grew at its quickest rate in over a year, powered by services, manufacturing, and construction. The upbeat performance comes against the backdrop of supportive domestic demand, improved investment activity, and easing cost pressures, helping the economy exceed the Reserve Bank of India’s (RBI) estimates.

Services and Industry Drive Q1 Expansion

Gross domestic product (GDP) rose 7.8% in April–June 2025, a sharp improvement over the 6.5% growth recorded in the same quarter last year. This also overshot the RBI’s forecast of 6.5% for the period, which the central bank had reaffirmed earlier this month during its monetary policy review.

Nominal GDP increased 8.8% to ₹86.05 trillion in the quarter. Real gross value added (GVA) at constant prices climbed 7.6% to ₹44.64 trillion, while nominal GVA also grew 8.8% to ₹78.25 trillion.

The services sector remained the economy’s backbone, expanding 9.3%. Manufacturing and construction both registered solid growth above 7.5%, reflecting strong demand and higher investment flows. Agriculture, however, saw a slower pace of 3.7%, while mining output declined and utilities reported only mild growth.

Momentum from the Previous Quarter and RBI Outlook

The robust Q1 performance followed an already strong March quarter (Q4 FY25), where GDP advanced 7.4% year-on-year. That was an acceleration from the 6.4% growth in the December quarter, and it surpassed market expectations of 6.7%. The pickup was attributed to softer food and energy prices, a reduction in borrowing costs, and renewed investor confidence.

Despite the better-than-expected numbers, the RBI has kept its FY26 GDP forecast unchanged at 6.5%. It expects domestic demand and government-led capital expenditure to remain the key growth drivers, with some recovery in rural consumption providing additional support. The central bank’s quarterly projections stand at 6.5% for Q1, 6.7% for Q2, 6.6% for Q3, and 6.3% for Q4.

Read More: Ex-RBI Governor Urjit Patel Appointed As IMF Executive Director For 3 Years!

Conclusion

India’s economy has opened FY26 with impressive momentum, achieving its best growth rate in five quarters. The strong showing in services and industrial activity underlines the resilience of domestic demand, though agriculture and mining continue to face challenges. While the RBI remains cautious with a modest 6.5% growth forecast for the year, the Q1 results suggest the economy could outperform if current trends hold.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.