India’s economy has once again demonstrated resilience, recording robust growth in Q1 FY 2025-26 and reaffirming its position as the world’s fastest-growing major economy. Despite global headwinds and external risks, domestic drivers such as manufacturing, construction, and services have kept the growth engine running.

Key Highlights of Q1 FY 2025-26

Indicator	Performance / Growth Rate
Overall GDP Growth	7.8% (fastest among major economies)
Nominal GDP Growth	8.8%
Manufacturing Growth	7.7%
Construction Growth	7.6%
Services Growth	9.3%
Agriculture GVA Growth	3.7%
Mining	-3.1% (decline)
Electricity & Utilities	0.5%
Private Consumption Growth	7-8%
Investment Growth	7-8%
Government Spending Growth	~10%

Key Insights

• Growth was broad-based, led by services and strong performance in manufacturing and construction.
• Private consumption and investments played a pivotal role, while government expenditure also gave a significant push.
• Some sectors like mining and utilities faced contraction or muted growth.

Global Pressures and Risks

A major risk on the horizon is the 50% tariff imposed by the U.S. on Indian exports, which could potentially reduce GDP growth by 20–90 basis points if sustained. Combined with global uncertainties and supply chain pressures, this presents a watch area for policymakers.

Despite these risks, India is projected to remain on track to become the world’s fourth-largest economy by the end of FY 2025-26, showcasing resilience in its growth trajectory.

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Manufacturing Sector: Emerging Trends

The manufacturing sector has been one of the cornerstones of India’s growth story this quarter. With a 7.7% expansion, the sector is witnessing structural changes driven by technology, sustainability, and global market realignment.

Trend	Description
Robust Growth Rates	Sector expanded by nearly 7.7%
Technology Adoption	AI, IoT, robotics, and Industry 4.0 practices enhancing productivity
Resilience	Adaptation to supply chain disruptions and rising costs
Sustainability Focus	Shift towards eco-friendly practices and waste reduction
Increasing Investment	Boosted by FDI and “Make in India” reforms
Supply Chain Diversification	Reducing dependency on single-source imports
Skill Development	Workforce training initiatives rising
Local Production	Preference for sourcing and producing domestically
Digital Transformation	Adoption of digital supply chain and operational tools
Increase in Exports	Manufacturers exploring global markets

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Outlook

India’s Q1 growth reflects both domestic resilience and global ambition. With services leading the momentum, manufacturing evolving rapidly, and government policies supporting investment, the outlook for the fiscal year remains strong. However, managing trade tensions, energy supply issues, and global demand uncertainties will be critical to sustaining this trajectory.