Manufacturing, services drive GDP growth to 7.8% in Q1 FY26

India’s GDP grew 7.8 per cent in the first quarter of FY26, well above the estimated 6.6 per cent, driven by strong performance in the manufacturing and services sectors, a report by CareEdge Ratings said on Tuesday.

Within services, all three segments performed robustly: Trade, Hotels, Transport, Commerce and Broadcasting grew 8.6 per cent (vs 6% estimate); Financial, Real Estate and Professional Services climbed 9.5 per cent (Q4 FY25: 7.8%); and Public Administration and Defence expanded 9.8 per cent (Q4 FY25: 8.7%).

“High-frequency indicators, including growth in central revenue expenditure, services exports, e-way bill collections, and cargo traffic, reflected strong services momentum. Overall growth exceeded expectations,” the report said.

The manufacturing sector saw 7.7 per cent growth, up from 4.8 per cent, supported by domestic consumption and pre-emptive imports by developed economies ahead of higher tariffs. However, industrial growth was partly restrained by a contraction in mining (-3.1% vs 2.5%) and a slowdown in utilities (0.5% vs 5.4%), affected by the early monsoon.

Agricultural growth moderated to 3.7 per cent (Q4 FY25: 5.4%) but is expected to strengthen with a favourable monsoon and robust Kharif sowing.

Gross Value Added (GVA) growth stood at 7.6 per cent for Q1 FY26. The positive gap between GDP and GVA was in line with expectations, as growth in indirect taxes outpaced subsidies.