Surprise Acceleration: India's GDP Grows 7.8% in the June Quarter, a Five-Quarter High

India's gross domestic product (GDP) grew 7.8% year on year in the April-June quarter of FY26 - the fiscal year that runs from April 1, 2025 to March 31, 2026 - marking a five-quarter high, according to data released by the National Statistics Office (NSO) on Friday, August 29, 2025. The acceleration beat every market forecast and came just before the full effect of Washington's tariff escalation is expected to show up in trade data.

A print that beat every forecast

An ET survey of 14 economists had projected first-quarter growth 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%. A year earlier, the same quarter had slipped to a 15-month low of 6.7%. The headline numbers from the official press release:

• real GDP at constant prices: 47.89 lakh crore rupees (about 47.9 trillion rupees, since one lakh crore equals one trillion) versus 44.42 lakh crore rupees a year earlier - growth of 7.8%;
• nominal GDP at current prices: 86.05 lakh crore rupees versus 79.08 lakh crore rupees - growth of 8.8%.

The full sectoral breakdown and economists' commentary were carried by The Economic Times.

Services and construction did the heavy lifting

The tertiary sector expanded 9.3% annually, while the primary sectors - agriculture and mining together - grew 2.8% after 2.2% in the corresponding quarter of FY25. The sectoral scoreboard:

• trade, hotels, transport, communications and broadcasting-related services: +8.6%, up from +5.4% a year earlier;
• financial, real estate and professional services: +9.5%, versus +6.6%;
• public administration and defence: +9.8%, versus +9%;
• manufacturing: +7.7%, roughly matching the 7.6% of the year-ago quarter, while the secondary sector (manufacturing and electricity) grew 7% after 8.6%;
• agriculture rebounded to +3.7% from +1.5%, while mining contracted 3.1% after growing 6.6%.

Public spending leads the way

The central government's capital expenditure rose 52% year on year in the first quarter, emerging as the key growth driver. Construction and agriculture performed strongly, while aviation cargo traffic, goods-and-services tax (GST) collection and steel production also showed an uptick.

What economists say

"GDP growth is expected to be supported by robust public spending, improving rural demand and a resilient services sector," said Rajani Sinha, chief economist at CareEdge Ratings. Sakshi Gupta, principal economist at HDFC Bank, pointed to construction and agriculture as the two sectors where the bank had pencilled in higher growth, adding that exports of goods and services rose 5.9% in the June quarter, aided by front-loaded demand from economies such as the United States.

The tariff overhang

Momentum now faces an external test. The initial 25% US tariff on Indian imports was later raised to as much as 50% with an additional levy, and economists expect the drag to become visible in the coming quarters. Barclays economist Aastha Gudwani estimated that persisting higher rates could shave 30 basis points off India's full-year growth - while arguing the impact should stay contained. "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," she said.

What supports growth next

Three domestic cushions could offset the trade headwind: a likely GST rationalisation, further interest-rate cuts steered by the RBI's monetary policy committee, and a favourable monsoon supporting rural consumption. For FY26 as a whole, the World Bank and the International Monetary Fund project growth of 6.3% and 6.4% respectively - keeping the country among the world's fastest-growing major economies.