India’s Q1 GDP springs big surprise with five-quarter high growth of 7.8% before US tariff blow

Beating estimates and marking a five-quarter high, India’s Gross Domestic Product (GDP) grew 7.8% in the April-June quarter of FY26, data released by the National Statistics Office (NSO) showed on Friday.

According to an ET poll of 14 economists, the Q1 GDP growth was projected between 6.3% and 7%, with a median estimate of 6.7%, broadly in line with the Reserve Bank of India’s (RBI) forecast of 6.5%. GDP had slipped to a 15-month low of 6.7% in the same quarter last year.

"Real GDP or GDP at Constant Prices in Q1 of FY 2025-26 is estimated at Rs 47.89 lakh crore, against Rs 44.42 lakh crore in Q1 of FY 2024-25, registering a growth rate of 7.8%. Nominal GDP or GDP at Current Prices in Q1 of FY 2025-26 is estimated at Rs 86.05 lakh crore, against Rs 79.08 lakh crore in Q1 of FY 2024-25, showing a growth rate of 8.8%," the official press release stated.

Sectoral classification
The primary sectors comprising agriculture and mining industries witnessed 2.8% growth on an annual basis as against 2.2% in the corresponding period of FY25.

Agriculture grew 3.7% in the first quarter of FY26 on an annual basis. The sector had grown at 1.5% in Q1 FY25. The mining sector contracted 3.1% in Q1 FY26, against a growth of 6.6% in FY25.


Further, the secondary sector consisting of manufacturing and electricity industries recorded a growth of 7% on an annual basis. The growth rate for India's secondary sector had stood at 8.6% in the same period of the last fiscal.

Manufacturing witnessed a growth of 7.7% for the first quarter of the current fiscal year on an annual basis. The manufacturing industry had recorded a growth of 7.6% in FY25.

The tertiary sector growth stood at 9.3% annually. Growth for trade, hotels, transport, communications and services related to broadcasting grew 8.6% on an annual basis in Q1 FY26, up from 5.4% in FY25.

Meanwhile, financial, real estate and professional services witnessed a growth of 9.5% in June quarter as against 6.6% in Q1 of the previous fiscal.

Public administration and defence recorded a growth of 9.8% in Q1FY26 on an annual basis against 9% in FY25.

Public spending boosts growth
The Centre’s capital expenditure rose by 52% year-on-year in the first quarter, emerging as a key growth driver. Construction and agriculture sectors performed strongly, while aviation cargo traffic, GST collection, and steel production also showed an uptick, an ET report said.

“GDP growth is expected to be supported by robust public spending, improving rural demand and a resilient services sector,” Rajani Sinha, chief economist, CareEdge Ratings, had said.

Sakshi Gupta, principal economist at HDFC Bank, had added, “Construction and agriculture are two sectors where we have accounted for higher growth. Exports of goods and services rose by 5.9% in the June quarter, aided by frontloaded demand from economies like the US.”

All eyes will now be on how GDP growth pans out from here with tariffs (original 25% plus additional 25%) in play. Economists expect that the likely GST rationalisation, RBI MPC-led interest rate cuts and a favourable monsoon might support consumption in the coming quarters.

But global trade risks remain. It may be noted here that Trump's initial 25% tariff on Indian imports later went up to as much as 50% after he imposed an additional levy linked to Russian oil trade. Barclays economist Aastha Gudwani estimated this could shave off 30 basis points from India’s full-year growth if the higher tariff rates persist.

“Overall, given the relatively closed nature of the Indian economy wherein domestic demand is the mainstay of growth, we do not see this 25% tariff threat impacting GDP growth meaningfully,” Gudwani added.

The World Bank and IMF have pegged India’s growth at 6.3% and 6.4% respectively in FY26, keeping the country among the world’s fastest-growing economies.