India’s economy grew at a faster-than-expected rate of 7.8% in the April-June quarter of FY26, up from 6.5% a year ago, driven by strong performances across sectors and underpinned by resilient domestic demand.
This solidifies India’s position as the fastest-growing major economy and brings it closer to becoming the world’s third-largest economy by 2030, with a projected GDP of $7.3 trillion.
Services, Manufacturing lead the way
The services sector remained the largest contributor, expanding at 9.3%, while manufacturing and construction grew by 7.7% and 7.6%, respectively. Allied sectors such as agriculture, forestry, and mining also saw a boost, recording 3.7% growth, compared to 1.5% in the same quarter last year.
“This quarter’s numbers reflect the resilience and momentum of the economy, built on strong macroeconomic fundamentals,” said Economic Affairs Secretary Anuradha Thakur.
Industrial Growth, Capex, and Consumption drive demand
According to an official release, the Index of Industrial Production (IIP) rose to 3.5% in July 2025, up from 1.5% in June. Manufacturing – particularly in basic metals and electrical equipment – was a key driver.
Capital expenditure for FY25 hit ₹10.52 lakh crore, and private consumption grew by 7.0%, aided by a rebound in rural demand. Government consumption surged by 9.7%, adding to the domestic growth momentum.
Inflation falls to multi-year low
Inflation showed marked improvement. CPI inflation dropped to 1.55% in July 2025, the lowest since June 2017. Food prices saw deflation at -1.76%, providing relief to households and increasing purchasing power, the release added.
The RBI’s flexible inflation targeting policy appears effective, with inflation remaining within the target band of 2-6% for three straight quarters.
Jobs on the rise, Labour market strengthens
India created 17 crore jobs over the past decade, as per the release. The labour force participation rate rose to 60.1% in 2023-24, with women’s participation nearly doubling. The unemployment rate dropped to 3.2%, and youth unemployment fell below the global average.
Rural job creation surged, while services remained the main source of employment in urban India.
Investment momentum strong
Foreign Direct Investment (FDI) touched $81 billion in FY25, with cumulative inflows since 2000 crossing $1.05 trillion. Equity inflows surged 27% year-on-year between April-December 2024. Domestic institutional investors also remained net buyers.
India’s forex reserves stood at $695.5 billion as of July 2025.
GST expansion and reforms
India now has over 1.52 crore active GST registrations, eight years after the tax reform’s launch. Encouragingly, 20% of taxpayers have at least one woman member, and 14% are women-owned businesses. The next wave of GST reforms, due in October 2025, will target MSMEs and reduce taxes on essentials.
Global Confidence and Ratings Boost
International institutions have echoed India’s positive growth outlook:
- IMF projects 6.4% growth for 2025 and 2026.
- S&P Global upgraded India’s sovereign rating for the first time in 18 years.
- Fitch Ratings affirmed India’s rating at ‘BBB-‘ with a stable outlook.
Reforms driving structural growth
Flagship government initiatives are reshaping the economic landscape:
- PLI Scheme attracted ₹1.76 lakh crore in investments.
- Digital India expanded internet users to 97 crore.
- PMJDY opened 56 crore bank accounts, 55% held by women.
- Make in India scaled India to the world’s second-largest mobile phone manufacturer.
With private investment ramping up, inflation under control, and public spending on infrastructure rising, India’s medium-term growth prospects remain strong, the government added. These trends reinforce the government’s vision of Viksit Bharat by 2047 – a developed, self-reliant, globally competitive nation.