Q1FY26 Real GDP grows at 7.8%; much better than street estimates

1 Sep 2025 , 11:50 AM

Q1FY26 GDP GROWTH ALMOST 140 BPS ABOVE EXPECTATIONS

On the last working day of August 2025, the MOSPI put out the Q1FY26  GDP growth figures. Q1FY26 real GDP growth surged to 7.8%, while the nominal GDP growth was also robust at 8.8%. Very low inflation helped prop up the real GDP figure, although the nominal growth was lower than previous quarters.What were the big drivers of growth in Q1FY26?

Manufacturing and Construction saw real growth of 7.7% and 7.6% respectively in Q1FY26. However, the real thrust came from services. The service sector was led by defence spending at 9.8%, financial services at 9.5% and trade & hotels at 8.6%. Agriculture grew 3.7% but mining and quarrying contracted by -3.1%.

Q1FY26 NOMINAL GVA AND NOMINAL GDP (QUARTERLY ESTIMATE)

Real GDP may be the standard measures of economic growth, but nominal GDP (before inflation) is a barometer of jobs, fiscal deficit, and economic activity.

Sector	Q1FY24 (₹ in Crore)	Q1FY25 (₹ in Crore)	Q1FY26 (₹ in Crore)	YOY (%) Q1FY25	YOY (%) Q1FY26
Primary Sector	12,16,656	13,13,607	13,35,410	8.0	1.7
Agriculture, Livestock, Forestry	10,81,545	11,62,510	11,99,589	7.5	3.2
Mining & Quarrying	1,35,111	1,51,096	1,35,821	11.8	-10.1
Secondary Sector	16,70,235	18,23,289	19,73,040	9.2	8.2
Manufacturing	9,14,820	9,91,485	10,91,967	8.4	10.1
Electricity, Gas, Utility Services	1,86,449	1,99,747	2,03,870	7.1	2.1
Construction	5,68,967	6,32,056	6,77,203	11.1	7.1
Tertiary Sector	36,84,661	40,57,771	45,16,227	10.1	11.3
Trade, Hotels, Transport	10,42,268	11,22,648	12,27,932	7.7	9.4
Financial, Professional Services	17,00,358	18,64,812	20,70,505	9.7	11.0
Public Administration, Defence	9,42,034	10,70,312	12,17,790	13.6	13.8
Nominal Gross Value Added (GVA)	65,71,552	71,94,667	78,24,677	9.5	8.8
Nominal Gross Domestic Product (GDP)	72,11,628	79,07,894	86,05,365	9.7	8.8

Data Source: MOSPI

There are key takeaways from nominal GDP data. Firstly, nominal GDP growth and nominal GVA growth at 8.8% were impressive. Data shows that inflation has substantially come down. What were the big drivers of nominal GDP growth in FY25? In the primary sector, while mining suffered, the agricultural output was in the positive.

Manufacturing improved by 170 bps in nominal terms to 10.1% in Q1FY26; largely due to revival in capital spending and a domestic focus. Growth in electricity output and construction are sharply lower compared to the year ago first quarter. Services growth was higher across the board in Q1FY26 and that contributed substantially to growth.

REAL GVA AND REAL GDP FOR Q1FY26 (QUARTERLY ESTIMATES)

The table below captures the sector wise break up of real GDP (net of inflation) for Q1FY26, juxtaposed with Q1FY25 and Q1FY24.

Sector	Q1FY24 (₹ in Crore)	Q1FY25 (₹ in Crore)	Q1FY26 (₹ in Crore)	YOY (%) Q1FY25	YOY (%) Q1FY26
Primary Sector	6,24,534	6,38,065	6,55,701	2.2	2.8
Agriculture, Livestock, Forestry	5,40,008	5,47,919	5,68,374	1.5	3.7
Mining & Quarrying	84,526	90,146	87,327	6.6	-3.1
Secondary Sector	10,89,237	11,82,833	12,65,896	8.6	7.0
Manufacturing	6,56,922	7,06,798	7,61,394	7.6	7.7
Electricity, Gas, Utility Services	96,203	1,05,981	1,06,470	10.2	0.5
Construction	3,36,112	3,70,054	3,98,032	10.1	7.6
Tertiary Sector	21,78,681	23,26,433	25,42,237	6.8	9.3
Trade, Hotels, Transport	6,53,847	6,89,172	7,48,348	5.4	8.6
Financial, Professional Services	10,55,657	11,25,793	12,32,476	6.6	9.5
Public Administration, Defence	4,69,176	5,11,468	5,61,413	9.0	9.8
Real Gross Value Added (GVA)	38,92,452	41,47,331	44,63,834	6.5	7.6
Real Gross Domestic Product (GDP)	41,70,114	44,41,664	47,88,623	6.5	7.8

Data Source: MOSPI

Real GDP growth at 7.8%, was surprisingly higher than expected. The thrust came from manufacturing; but more importantly from services. More importantly, the tumult in global markets and policy flux has had little impact. The Trump Tariff impact will be felt in Q2 and more distinctly in Q3. The domestic story appears to be playing out fairly, as evident from the sharp revival in the services sector.

The India growth story is; at 7.8% real growth, enviable and also salivating. Among the global large economies, India remains the fastest growing; for the fourth year in a row. But, more importantly, the Indian economy appears to have taken the global crisis in its stride.