India’s Economy Grew Faster Than Expected — The Sectors Behind 7.8% GDP

The Indian economy recorded a robust 7.8 per cent growth in Gross Domestic Product (GDP) during the April–June quarter (Q1) of the Financial Year 2025–26, according to data released by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI). This marks a strong jump from the 6.5 per cent growth reported in the same period last year. Several sectors showed a robust performance to become an essential driver for the achieved number.

At current prices, nominal GDP expanded by 8.8 per cent, reaching Rs 86.05 lakh crore compared to Rs 79.08 lakh crore in Q1 FY25. Real GDP, adjusted for inflation, stood at Rs 47.89 lakh crore.

Sectoral Performance: Manufacturing And Services Outshine

Manufacturing Sector: Growth was largely driven by a significant uptick in the secondary and tertiary sectors as manufacturing grew by 7.7 per cent, while the construction sector recorded a 7.6 per cent increase in real Gross Value Added (GVA).

Service Sector: The services sector or tertiary sector saw a 9.3 per cent jump, up from 6.8 per cent in Q1 FY25, signalling continued post-pandemic recovery and consumer demand.

Agriculture Sector: The agriculture and allied sector also improved, registering a 3.7 per cent GVA growth, compared to 1.5 per cent in the same quarter last year.

Sectors With Muted Performance

In contrast, mining and quarrying contracted by 3.1 per cent, and the utilities sector (electricity, gas, water supply, etc.) saw muted growth at just 0.5 per cent.

Spending And Investment Trends

Private consumption and investment contributed steadily, but government expenditure made a notable comeback as Government Final Consumption Expenditure (GFCE) grew by 9.7 per cent in nominal terms, recovering from 4.0 per cent growth in the previous year.

Private Final Consumption Expenditure (PFCE) grew by 7.0 per cent in real terms, slightly slower than the 8.3 per cent growth seen last year. Gross Fixed Capital Formation (GFCF), a proxy for investment demand, expanded 7.8 per cent, compared to 6.7 per cent in Q1 FY25.

Trump’s 50 Per Cent Tariffs Impact

Donald Trump’s additional 25 per cent tariffs are likely to harm India’s GDP, but in a contained manner, suggest experts. Sajid Chinoy, Head of Asia Economic Research at JPMorgan, highlights that at a 25 per cent US tariff, India remains roughly competitive compared to other Asian exporters, with additional policy measures available to help maintain market share. However, a steep 50 per cent tariff would put India at a clear disadvantage. Exports to the US account for about 2.3 per cent of India’s GDP, but after factoring in exemptions, mainly in electronics and pharmaceuticals and value addition considerations, roughly 1 per cent of GDP is genuinely at risk.

Chinoy stressed that while 1 per cent may seem modest, this impact is concentrated in labour-intensive sectors, such as gems and jewellery, where high import content is prevalent. The potential job losses in these areas could trigger a broader slowdown in consumption, amplifying the overall economic effect beyond the direct tariff impact.