Winning Bizness Desk
Mumbai.India’s economy recorded strong growth in the first quarter of financial year 2025-26. Gross Domestic Product (GDP) expanded by 7.8 percent between April and June, compared to 6.5 percent in the same period last year. This is the highest growth in the last five quarters. The rise came mainly due to better performance in manufacturing, services, and agriculture sectors, which together provided strong support to overall economic activity.
Trump dismissed India as dead economy in July
Just a month before this data, former US President Donald Trump had criticized India and Russia, calling them dead economies. His remark came on July 31 after he imposed a 25 percent tariff on Indian goods. He said that both countries would sink together, showing his disapproval of their economic outlook. However, the fresh GDP data has proved otherwise, highlighting India’s resilience despite global trade challenges.
Key reasons behind the higher growth
The first quarter saw multiple factors lifting the economy. The services sector, which includes trade, hotels, transport, and finance, grew by 9.3 percent, becoming the strongest driver. Manufacturing and construction rose by more than 7.5 percent, strengthening industrial output. Consumer spending also played a big role, with private consumption up by 7 percent. Government spending rose even faster at 9.7 percent, compared to just 4 percent in the same quarter last year. Investment also showed momentum, with fixed capital formation rising 7.8 percent. Agriculture, which had slowed to 1.5 percent last year, bounced back to 3.7 percent.
RBI growth forecast stays at 6.5 percent
The Reserve Bank of India had projected the economy to grow 6.5 percent for FY26. The bank maintained this estimate in its August 6 monetary policy meeting. The RBI governor said that a good monsoon season and the upcoming festival demand would support the economy further. He also mentioned that government policies and central bank support are creating a favorable climate for growth, despite global uncertainties.
Understanding GDP and how it is measured
Gross Domestic Product is the most common way to measure the health of an economy. It represents the total value of all goods and services produced within a country in a given period. GDP has two forms: real GDP, which is calculated at constant prices based on a base year (currently 2011-12), and nominal GDP, which is calculated at current prices. The formula used is GDP = C + G + I + NX, where C stands for private consumption, G for government spending, I for investment, and NX for net exports.
Four main engines that drive GDP
There are four major drivers behind the rise or fall of GDP. The first is household spending, as the money people spend directly supports the economy. The second is business growth in the private sector, which contributes about 32 percent. The third is government expenditure, accounting for around 11 percent of GDP. The fourth is net demand, calculated by subtracting imports from exports. Since India imports more than it exports, this factor usually impacts GDP negatively.
Story in a nutshell
- India’s GDP rose to 7.8 percent in April-June 2025.
- This is the fastest growth in the last five quarters.
- Services sector grew the most at 9.3 percent.
- Manufacturing and construction grew above 7.5 percent.
- Consumer spending and government expenditure also increased strongly.
- Agriculture growth improved to 3.7 percent from last year’s 1.5 percent.
- RBI continues to project 6.5 percent growth for FY26.
