India’s Economy Expands 7.8% in June Quarter, Highest in Five Quarters

India’s gross domestic product expanded 7.8% in the April–June quarter, outstripping the 6.7–6.9% growth expected in polls by various media organisations and surpassing both the 7.4% pace of the preceding January–March quarter and the 6.5% expansion in the same quarter a year earlier. The print also marked the strongest growth in five quarters, highlighting a renewed pick-up in momentum.

The higher-than-expected growth may give space to the RBI to hold on to the repo rate and keep monetary policy stance neutral. There was a clamour building up for a cut in rates amid US tariff hikes and low inflation.

The nominal GDP grew 8.8%, lower than the 9.7% pace recorded a year earlier.

Sectoral Performance
Growth was broad-based across agriculture, industry and services, though with uneven contributions. Agriculture rose 3.7%, improving from 1.5% in the previous year, aided by higher foodgrain and horticulture output.

Manufacturing and construction registered growth of 7.7% and 7.6%, respectively, reflecting steady momentum in industrial activity. In contrast, mining and quarrying contracted 3.1%, while electricity, gas, water supply and utilities posted marginal growth of 0.5%.

The services sector remained the largest driver, expanding 9.3% compared with 6.8% in the year-ago period. Trade, hotels, transport and communication services grew 8.6%, while financial, real estate and professional services rose 9.5%. Public administration, defence and other services posted 9.8% growth, supported by higher government expenditure.

Real gross value added grew 7.6%, with tertiary sectors accounting for over half of output. The rebound in government expenditure, alongside steady investment and services momentum, underpinned growth despite weaker mining output and a subdued utilities segment.

Expenditure Components
On the demand side, private final consumption expenditure rose 7.0%, lower than the 8.3% growth seen a year earlier, indicating moderation in household spending. Government final consumption expenditure increased 7.4%, recovering from a marginal contraction in the previous year.

Gross fixed capital formation, a measure of investment activity, expanded 7.8%, improving from 6.7% in the same quarter of 2024-25. Exports of goods and services grew 6.3%, while imports rose faster at 10.9%, leading to a negative net trade contribution.