India’s economic performance in 2025 stands out as a remarkable example of resilience in a world fraught with uncertainties. In the first quarter of FY 2025-26, the economy recorded a real GDP growth of 7.8%, the highest in five quarters, improving from 7.4% in the previous quarter (Q4 2024-25). This impressive growth reflects India’s ability to withstand global headwinds, including trade, geopolitical instability, and monetary tightening in advanced economies. Supported by timely fiscal interventions, strong domestic demand, and an early boost from exports, India has reaffirmed its position as the fastest-growing major economy.
This article analyses the sectoral performance, growth drivers, and macroeconomic implications of India’s trajectory, comparing it with global headwinds. It also assesses growth expectations and the challenges India must navigate to sustain its position as one of the fastest-growing major economies.
India real GDP surged by a robust 7.8% in Q1 of FY 2025-26, well above from the 6.5% recorded a year earlier (Q1 2024 -25), the expansion was not concentrated in a single sector but spread across agriculture, industry, and services. Gross Value Added (GVA) grew by 7.6%, underscoring broad-based momentum. The primary sector expanded modestly by 2.8%, yet agriculture performed strongly at 3.7%, offsetting a contraction in mining.
The secondary sector rose by 7%, led by manufacturing at 7.7% and construction at 7.6%, both benefiting from higher public capital expenditure and infrastructure development. The tertiary sector proved to be the star performer, surging by 9.3%. Financial services expanded by 9.5%, public administration and defence grew by 9.8%, while trade, hotels, and transport rose by 8.6%. This structural composition indicates that India’s economy is well-diversified, with services providing a strong anchor while agriculture and industry continue to contribute meaningfully.
Sr. No.
Sector
Percentage Change Over
Pervious Year
Source: Compiled from MOSPI
The global context magnifies the significance of this performance. While India posted robust gains, many advanced economies reported subdued growth. The United States, for instance, entered 2025 with a contraction before showing partial recovery, while Europe continued to face challenges from weak demand and inflationary pressures.
China struggled with supply-chain disruptions and external trade tensions. Against this backdrop, India’s sustained expansion underscores its role as a stabilizing force and key contributor to global growth. It has effectively become a counterweight to stagnation in advanced economies, further elevating its influence in international economic affairs.
However, growth also reveals underlying imbalances. The mining and quarrying sector contracted by 3.1%, while electricity, gas, and water supply registered meagre growth of 0.5%. These figures expose structural weaknesses in resource utilization and energy supply, both critical for long-term industrial competitiveness.
Moreover, while consumption continues to drive growth, suggesting the need for stronger private capital formation. Sustaining high growth will require a greater focus on boosting productivity, fostering innovation, and ensuring resource efficiency across all sectors.
The outlook for FY2025-26 remains positive, though cautious. RBI Projections suggest full-year GDP growth in the range of 6.0% to 6.5%. This moderation compared with the strong quarterly figures reflects external vulnerabilities, particularly global trade disruptions and geopolitical risks. Nevertheless, India’s domestic resilience provides a buffer.
The government’s continued emphasis on infrastructure, digitalization, and policy continuity is expected to support investment, while services are likely to maintain their dynamism. If global conditions stabilize, exports could provide an additional growth impulse.
At the same time, policymakers must navigate several challenges to sustain momentum. Job creation remains a pressing priority, particularly as services-led growth does not always generate sufficient employment opportunities. Energy security and climate adaptation are critical, given India’s growing industrial and consumption needs.
Agricultural resilience will also be essential, as erratic monsoons and climate variability can undermine rural demand and food supply chains. Furthermore, with consumption forming such a high share of GDP, maintaining household purchasing power in the face of inflationary pressures will be vital for preserving demand.
From a strategic perspective, India’s growth story carries broader global implications. As advanced economies struggling with economic stagnation, India’s steady expansion enhances its role in shaping global trade, investment, and policy debates. Its demographic dividend, expanding middle class, and technological capabilities position it to drive innovation and consumption patterns across emerging markets. By deepening trade diversification, advancing manufacturing competitiveness, and strengthening institutional reforms, India can consolidate its role as a long-term engine of global growth.
In conclusion, India’s economic performance in the first quarter of FY2025-26 highlights both resilience and opportunity. A strong 7.8% GDP growth rate, driven by balanced sectoral expansion and underpinned by policy interventions, domestic demand, and external gains, distinguishes India from its peers.
Yet, challenges such as sectoral imbalances, external vulnerabilities, and the need for job creation remain. By addressing these issues through structural reforms and sustained investment in critical sectors, India can ensure that its current momentum evolves into durable long-term growth. In an era defined by global uncertainty, India has emerged as a beacon of stability and expansion, reinforcing its place at the centre of the world’s economic future.
You must be logged in to post a comment.
Stay ahead in the dynamic world of trade and commerce with India Business & Trade's weekly newsletter.