India’s economy has once again defied skeptics, with Q1 FY26 GDP growth data reinforcing the nation’s strong upward momentum. Expanding by 7.8%, which is nearly a full percentage point above consensus expectations, the country has outpaced its global peers, powered by robust gains across both manufacturing and services.

Growth Anchored in Stability

Nominal GDP rose by 8.8% in the April–June quarter, supported by remarkably stable inflation. For the same period, wholesale price inflation averaged just 0.28%, while consumer price inflation held at 2.69%. With the GDP deflator at roughly 1%, real growth appears even more impressive. Crucially, this stability has preserved household purchasing power and bolstered corporate profitability, highlighting the resilience of India’s growth story.

Broad-Based Economic Confidence

High-frequency indicators paint a vivid picture of surging consumer sentiment. Railways, air travel, and hospitality sectors have seen marked increases in activity, while resilient private consumption—growing at 7%—points to prosperity spreading more widely across the economy. A steady flow of housing loans and softer borrowing costs, following rate cuts earlier this year, have also provided momentum.

Public capital expenditure has played a central role, with the central and state governments frontloading a significant portion of their infrastructure budgets. This has boosted implementation capacity and laid foundations for sustained, long-term growth. The challenge, however, remains in converting this public investment push into a self-sustaining private investment cycle.

Sectoral Strengths and Corporate Performance

Services led the way in Q1 FY26, expanding by 9.3% and accounting for nearly 70% of incremental value addition. Manufacturing followed with a 17% share, together making up 85% of the quarter’s economic gains. Corporate India mirrored these trends: listed non-financial companies reported revenue growth of 3.4%, EBITDA expansion of 8.5%, and multi-quarter high margins—proof that the manufacturing revival is translating into tangible business results.

Headwinds on the Horizon

Despite this upbeat narrative, risks loom. There is a significant challenge owing to the recent imposition of over 50% new U.S. tariffs on key Indian export sectors, including textiles, gems and jewellery, chemicals, agriculture, and auto components. Beyond the potential GDP impact, the tariffs threaten employment in labor-intensive industries, risking a dent in both confidence and growth momentum.

The Road Ahead

India’s Q1 FY26 performance signals not just strong growth, but also a qualitative improvement in sentiment, policy execution, and sectoral depth. However, slower nominal GDP growth could make fiscal management more complex, while global uncertainties remain potential disruptors. Sustained private sector participation and proactive policy responses will be vital to ensuring that this growth is both durable and inclusive.