India’s economy registered an impressive surge in the first quarter of the 2025-26 financial year, with Gross Domestic Product (GDP) expanding by 7.8%, significantly higher than both the Reserve Bank of India’s (RBI) projection of 6.5% and the growth of 6.5% recorded in the same quarter last year.

This expansion also represents the fastest pace of growth in the last five quarters, second only to the 8.4% growth achieved in the January-March quarter of 2024. The robust performance highlights India’s ability to maintain its strong economic momentum despite global uncertainties and particularly at a time when major economies are grappling with sluggish growth and trade tensions.

With this acceleration, India continues to cement its position as the world’s fastest-growing major economy, outpacing China, which grew at 5.2% during the same April-June 2025 period. The current figures reinforce India’s growing role as a global growth driver, especially as developed economies like the US and Europe confront inflationary pressures, slower demand, and rising trade disputes.

Sectoral performances played a decisive role in pushing growth beyond expectations. The services sector posted a sharp increase of 9.3%, compared to 6.8% in the corresponding quarter last year, underscoring the resilience of areas such as IT services, financial activities, and trade-related services. 

The agriculture sector also delivered a commendable turnaround, rising to 3.7% from just 1.5% a year ago, aided by favourable weather conditions and strong rural demand, partly driven by an above-normal monsoon. Meanwhile, the construction sector, though still robust at 7.6%, saw a moderation compared to its double-digit growth of 10.1% in the same quarter last year, suggesting some early signs of stabilisation in infrastructure-led demand.

The Reserve Bank of India, which had earlier forecast India’s real GDP growth for the full year 2025-26 at 6.5%, with quarterly projections ranging between 6.3% and 6.7%, now faces an upward revision challenge, owing to the stronger-than-expected Q1 data.

Governor Sanjay Malhotra had recently highlighted that “an above-normal southwest monsoon, lowering inflationary pressures, rising capacity utilisation, congenial financial conditions, along with supportive fiscal and monetary policies” would act as key enablers for domestic activity. His outlook also emphasised the role of government-led capital expenditure, which continues to boost infrastructure creation and crowd in private investment.

Another encouraging aspect behind the growth is moderating inflation, which has allowed for greater consumption spending and business confidence. A stable interest rate regime, coupled with robust credit growth, is translating into higher investments and demand.

This has complemented the government’s fiscal push for infrastructure and rural support, ensuring both urban and rural segments contribute to the overall economic expansion. Rising private investment, driven by improving capacity utilisation and foreign interest in India’s manufacturing and services landscape, has further helped sustain momentum.

Looking ahead, the growth trajectory suggests that India’s economic fundamentals remain sound, although risks cannot be ruled out. Rising energy prices, external trade tensions, and potential weather-related disruptions could present challenges for the remaining quarters of FY2025-26.

Nevertheless, the upbeat Q1 results not only exceed expectations but also reinforce India’s role as a key anchor of global growth. If current trends in services and agriculture remain steady and supply-side inflation risks stay contained, India is well-positioned to close the fiscal year with stronger-than-anticipated growth, outpacing peers and consolidating its leadership as the fastest-growing major economy.

Agencies