STRONG SERVICES sector exercise helped GDP progress comfortably beat expectations for the second quarter in a row, rising to a five-quarter excessive of seven.8 per cent for April-June 2025, in response to knowledge launched by the statistics ministry on Friday. It’s greater than the January-March 2025 progress price of seven.4 per cent, and first quarter 2024-25 progress price of 6.5 per cent.
The fast progress within the first quarter of the present monetary yr additional consolidates India’s place because the world’s quickest rising giant financial system amid a very turbulent time that has seen the US tariff conflict buffet world financial prospects and push policymakers into a good spot. On August 27, Indian items into the US began dealing with a 50 per cent tariff, with President Donald Trump having introduced a doubling of the levy earlier within the month, blaming it on New Delhi’s continued buy of Russian arms and oil.
Earlier this month, on August 6, the Reserve Financial institution of India (RBI) had forecast GDP progress to edge decrease at 6.5 per cent in April-June. Whereas economists from outdoors the central financial institution additionally anticipated progress to return in under the 7.4 per cent recorded in January-March, they broadly noticed the determine nearer to 7 per cent.
Addressing reporters in a briefing, Chief Financial Advisor V Anantha Nageswaran expressed optimism concerning the authorities’s progress forecast of 6.3-6.8 per cent GDP progress for the present monetary yr regardless of the issues attributable to the 50 per cent US tariff.
“Clearly, there may be some uncertainty with respect to the period of the interval for which the extra tariff associated to Russian crude oil buy would final. However on the whole, the conversations are happening and there may be an expectation that we’ll see some type of a decision within the not-so-distant future… In fact, the draw back danger is there in case the tariff deadlock stays for an extended interval. However we’re hopeful that that might be resolved sooner quite than later,” Nageswaran mentioned.
Companies exercise zooms
The sharp pick-up in progress in April-June was on the again of providers sector progress hitting a two-year excessive of 9.3 per cent. Excessive-frequency knowledge because the begin of July is indicative of continued strong progress within the providers sector, with non-official knowledge launched final week displaying the HSBC Flash India Companies Buying Managers’ Index rose to an all-time excessive of 65.6 in August from 60.5 in July.
The rise in providers progress in April-June was aided by a broad enchancment in all three parts. Whereas progress in Gross Worth Added (GVA) of ‘Commerce, Resorts, Transport, Communication & Companies associated to Broadcasting’ elevated to eight.6 per cent from 6 per cent in January-March and 5.4 per cent in April-June 2024, ‘Monetary, Actual Property & Skilled Companies’ posted a GVA progress of 9.5 per cent, up from 7.8 per cent within the earlier quarter and 6.6 per cent a yr in the past. In the meantime, at 9.8 per cent, the GVA of ‘Public Administration, Defence & Different Companies’ grew even quicker.
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On the entire, GVA progress – seen as a extra significant measure of exercise ranges – in April-June was at a six-quarter excessive of seven.6 per cent in April-June. GVA is arrived at by subtracting internet oblique taxes – oblique taxes after adjusting for subsidies – from the GDP. In April-June, internet taxes had been 10.3 per cent larger from a yr in the past, when measured in fixed costs.
All engines firing
All sectors, from manufacturing to providers, fired the financial system within the first quarter of 2025-26. Companies progress price was at a 2-year excessive, farm sector expanded 3.7%, and manufacturing 7.7%. If the US commerce talks work, the momentum will proceed.
Agri regular, manufacturing rises
Companies aside, the first and secondary sectors additionally confirmed strong progress in April-June, with the agricultural sector increasing by 3.7 per cent, greater than double the 1.5 per cent progress recorded in the identical three months of final yr. Nonetheless, the GVA of ‘Mining & Quarrying’ expectedly contracted as a result of sudden heavy rainfall through the quarter that impeded mining exercise.
The identical rainfall additionally hit GVA progress of ‘Electrical energy, Fuel, Water Provide & Different Utility Companies’. As a consequence of lowered demand for energy due to the cooling impact of the rains, GVA progress of the aforementioned class rose by simply 0.5 per cent. Development exercise was impacted too, with its progress slipping to a nine-quarter low of seven.6 per cent.
Manufacturing, nevertheless, provided assist, because the sector expanded 7.7 per cent in April-June, up from 4.8 per cent in January-March and barely larger than the 7.6 per cent posted a yr in the past.
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Madan Sabnavis, Chief Economist at Financial institution of Baroda, cautioned that the excessive actual GDP progress price in April-June was aided by low worth deflators – on account of low inflation. With out adjusting for inflation, nominal GDP progress within the quarter was 8.8 per cent, the bottom in three quarters.
Good headache for policymakers
The sudden pick-up in progress might be welcomed by policymakers, who’ve been scrambling to offset the impression of the 50 per cent tariff imposed by the US on items from India. In his Independence Day speech earlier this month, Prime Minister Narendra Modi introduced a raft of reforms to spice up progress, together with the long-awaited rationalisation of the Items and Companies Tax (GST) regime that’s broadly anticipated to drive consumption larger. This follows an identical consumption push introduced by Finance Minister Nirmala Sitharaman within the Union Finances for 2025-26, when revenue tax charges below the brand new direct tax regime had been lowered.
The most recent GDP knowledge, although, confirmed cheap progress in non-public consumption. Whereas decrease than the 8.3 per cent progress a yr in the past, non-public ultimate consumption expenditure rose by 7 per cent in April-June, up from 6 per cent in January-March. Gross mounted capital formation – a proxy for investments – elevated by 7.8 per cent, down from 9.4 per cent within the earlier quarter, however larger than 6.7 per cent in April-June 2024. In keeping with the near-10 per cent progress in ‘Public Administration, Defence & Different Companies’ – indicative of excessive progress in general authorities expenditure – authorities ultimate consumption expenditure rebounded in April-June, posting a rise of seven.4 per cent in comparison with a contraction of 1.8 per cent in January-March and 0.3 per cent a yr in the past.
In keeping with Sujan Hajra, Chief Economist at Anand Rathi Monetary Companies, whereas dangers to the financial system from US tariffs stay, “reforms gaining traction and inflation staying modest” meant “India continues to face out as probably the most compelling macro story in a dark world”.
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“Development for the total yr continues to be prone to common round 6.5 per cent, even after factoring in tariff headwinds, whereas nominal GDP progress within the excessive single digits helps company earnings enlargement of 11–13 per cent,” Hajra added.