India Q1FY26 Gross Domestic Product (GDP) growth accelerated to 7.8% YoY from 7.4% YoY in the previous quarter, significantly exceeding the RBI’s projection of 6.5% YoY. Gross Value Added (GVA) picked up to 7.6% YoY in Q1 from 6.8% in Q4FY25, driven by strong ‘financial services, real estate and professional services’ growth.

Manufacturing sector growth recovered to 7.7% YoY from 4.8% in the previous quarter, as higher operating profit growth of listed manufacturers offset weaker industrial production. Construction sector growth eased to 7.6% from 10.8%, in line with the slowdown in cement production and finished steel consumption. Financial Services+ reported robust growth of 9.5% YoY. Trade+ and Public Admin+ also recorded strong growth.

On the expenditure side, private consumption improved to 7.0% YoY in Q1 from 6.0% in the previous quarter. Fixed investment growth remained robust at 7.8% YoY, supported by robust central government expenditure. There was a net negative contribution from external trade as import growth outpaced export growth.

We expect FY26 GDP growth to be around 6.5-6.7% YoY. The rollout of GST 2.0 could boost consumption, but growth faces downside risks from higher US tariffs.

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