India’s economy grew faster than expected at 7.8% in the April–June quarter of FY 2025-26, consolidating its position as the world’s fastest-growing major economy.
Powered by strong domestic demand, a robust services sector, and resilient manufacturing activity, the country is on course to reach a $7.3 trillion GDP by 2030 and emerge as the world’s third-largest economy.
Growth momentum strengthens
Real GDP for the first quarter of FY 2025-26 is estimated at ₹47.89 lakh crore, compared with ₹44.42 lakh crore in the same period last year, reflecting 7.8% growth against 6.5% a year earlier.
On the supply side, all sectors reported solid expansion. Agriculture and allied activities grew 3.7%, up from 1.5% last year, supported by good rainfall and higher crop output. Manufacturing rose 7.7% and construction 7.6%, while services recorded a sharp rise of 9.3%.
Gross Value Added (GVA), a measure of actual activity, rose 7.6% in April–June, reflecting broad-based recovery.
Economic Affairs Secretary Anuradha Thakur stated that the numbers demonstrate resilience rooted in strong fundamentals. “We have seen all-round growth in manufacturing, construction, services and agriculture. Domestic demand continues to be the primary driver,” she noted.
Services lead the upswing
The services sector remains the standout performer, clocking 9.3% growth in the first quarter. Sub-sectors such as trade, hotels, transport, communication, financial services, real estate, and public administration all reported healthy expansion.
The government expects consumer spending to continue rising, aided by easing inflation, higher employment, and positive rural demand. Private consumption expenditure grew 7% in the quarter, while government expenditure expanded 9.7% in nominal terms.
Industrial activity and GST milestone
Industrial growth has shown signs of renewed strength. The Index of Industrial Production rose 3.5% in July, compared to 1.5% in June, driven by 5.4% growth in manufacturing.
Fourteen out of 23 industry groups posted positive growth. The strongest contributors were basic metals (12.7%), electrical equipment (15.9%), and non-metallic mineral products (9.5%).
Meanwhile, India’s Goods and Services Tax (GST) completed eight years in July 2025. Active GST registrations now exceed 1.52 crore, with Uttar Pradesh, Maharashtra, Gujarat, Tamil Nadu, and Karnataka together accounting for nearly half. Women’s participation is on the rise, with 20% of taxpayers having at least one woman member and 14% being fully women-owned.
Next-generation GST reforms, scheduled for October 2025, aim to reduce taxes on essentials, ease compliance for small businesses, and enhance transparency.
Capital expenditure and investment trends
Government-led capital expenditure has remained a critical driver of growth. In 2024-25, capital outlay touched ₹10.52 trillion, surpassing revised estimates. The ratio of capital to revenue expenditure has remained above 0.27 for three consecutive years, nearly double the pre-COVID average.
Public investment continues to support demand, while private investment is showing momentum, helped by higher business confidence and capacity expansion.
Foreign investment has also been robust. India received $81 billion in foreign inflows in FY 2024-25, with cumulative inflows since 2000 crossing $1 trillion. FDI equity inflows alone rose 27% year-on-year to ₹3.40 lakh crore between April and December 2024. Foreign exchange reserves stood at $695.5 billion in July, having briefly crossed the $700 billion mark in June.
Inflation moderates
Inflationary pressures eased sharply in July 2025, providing relief to households. Consumer Price Index-based inflation fell to 1.55% year-on-year, the lowest since June 2017. Food inflation entered negative territory at -1.76%, with both rural and urban areas recording declines.
Reserve Bank of India (RBI) Governor Sanjay Malhotra said the inflation outlook has become more benign due to healthy crop output, adequate stocks, and favourable base effects. With CPI inflation consistently within the 2-6% tolerance band, monetary stability is expected to support consumption and investment.
Employment gains continue
Job creation has accelerated alongside growth. Over the past decade, India generated 17 crore jobs, aided by government schemes and structural reforms. The Labour Force Participation Rate for those aged 15 and above rose from 49.8% in 2017-18 to 60.1% in 2023-24. Female participation doubled from 23.3% to 41.7% in the same period.
In the April–June 2025 quarter, labour force participation stood at 55%, with rural areas at 57.1% and urban areas at 50.6%. Unemployment fell to 5.2% in July from 5.6% in June. The rural unemployment rate stood at 4.8%, lower than the 6.8% reported in urban areas.
Agriculture remains the prime source of rural employment, while services dominate in urban areas. Self-employment is prevalent in villages, whereas salaried jobs form a larger share in cities. Youth unemployment has declined to 10.2%, below the global average.
Reform measures and policy initiatives
A series of flagship initiatives has shaped India’s growth trajectory over the past decade.
- Production Linked Incentive (PLI) Scheme: Covering 14 sectors, with an outlay of ₹1.97 lakh crore, it has attracted ₹1.76 lakh crore in investment and boosted exports.
- Digital India and Bharat 6G Vision: Internet penetration has expanded from 25 crore in 2014 to nearly 97 crore in 2024, making India the world’s third most digitalised economy.
- Financial Inclusion: Over 56 crore Jan Dhan accounts have been opened, more than half held by women, supporting direct benefit transfers and financial access.
- Make in India: The country is now the second-largest mobile phone manufacturer with more than 300 factories.
- PM Viksit Bharat Rozgar Yojana: Targets 3.5 crore youth employment between 2025 and 2027.
- Skill India Mission: Over 6 crore trained through skilling and apprenticeship programs.
- PM GatiShakti and National Logistics Policy: Driving infrastructure and connectivity improvements.
These measures are reinforced by tax reforms, ease of doing business initiatives, and export promotion policies aimed at positioning India as a global hub for trade and manufacturing.
Global outlook and ratings
India’s growth prospects have drawn positive attention from international agencies. The UN projects growth of 6.3% in 2025 and 6.4% in 2026. The IMF expects 6.4% growth in both years, while S&P Global recently upgraded India’s sovereign credit rating to BBB from BBB-, the first upgrade in 18 years. Fitch has affirmed its BBB- rating with a stable outlook.
According to S&P, India’s growth averaged 8.8% between FY22 and FY24, the highest in the Asia-Pacific region, and is expected to remain above 6% in the years to come.
Road ahead
India’s growth story continues to be powered by strong domestic demand, rural revival, and rising investment. With inflation under control, a robust labour market, and supportive policies, the country is well-positioned to sustain momentum.
As the economy advances toward a $5 trillion milestone by 2027 and a $7.3 trillion target by 2030, reforms in taxation, manufacturing, digitalisation, and infrastructure are expected to anchor medium-term expansion. For policymakers, the challenge will be to maintain macroeconomic stability while ensuring inclusive growth.