India’s Growth Momentum Strengthens in FY26

The National Statistical Office (NSO) reported that India’s GDP expanded 7.8% YoY in Q1 FY26, accelerating from 7.4% in Q4 FY25 and surpassing analyst forecasts of 7.5%. This performance highlights India’s resilience amid global economic uncertainty and positions it well ahead of China (5.1%) and the U.S. (2.8%) in the same period.

Key Growth Drivers

• Manufacturing & Construction Surge: Strong double-digit expansion driven by the PLI schemes, rising auto production, and housing demand.

• Services Sector Resilience: IT, financial services, and hospitality continued to outperform, fueled by robust domestic consumption.

• Government-Led Investments: Central and state infrastructure projects drove capital formation, bolstering employment and supply chains.

• Urban Consumption Strength: Spending on discretionary goods and services remained high, while rural demand showed early signs of recovery despite erratic monsoon patterns.

Market & Investor Sentiment

Equity markets reacted positively, with banking, capital goods, and infrastructure stocks gaining on the upbeat data. The rupee edged higher, and bond yields remained stable, reflecting fiscal confidence. Foreign investors see India’s growth momentum as a safe haven amid slowing global trade, likely supporting continued inflows into equities and infrastructure projects.

Broader Economic Context

India’s sustained growth above 7% cements its position as the world’s primary growth engine, even as advanced economies face tightening monetary policies and sluggish trade. Policymakers now have a stronger foundation to:

• Maintain fiscal discipline while advancing structural reforms.

• Encourage private sector investment to complement government-led growth.

• Navigate risks from volatile crude oil prices, a strong dollar, and weaker global demand.

Economists emphasize that private capital expenditure will be crucial to extending growth momentum beyond public investment-led expansion.

Expert View

Final Word

At 7.8% GDP growth, India’s economy continues to outpace its global peers, underscoring the success of reforms, robust domestic demand, and strategic public investment. While challenges like rising oil prices and external headwinds persist, India’s strong fundamentals and growth trajectory make it a standout story in an otherwise fragile global economy.