India's economy has shown strong growth in the first quarter of fiscal year 2026 (Q1 FY26), with the GDP expanding by 7.8%. This figure surpasses the Reserve Bank of India's (RBI) earlier projection of 6.5% and marks the highest growth rate in the last five quarters.

The robust performance is attributed to strong showings by the agriculture and manufacturing sectors. The agriculture sector grew by 3.7%, acting as a key driver for the overall GDP growth. The manufacturing sector also contributed positively, with a 7.7% expansion.

Nominal GDP, or GDP at current prices, is estimated at ₹86.05 lakh crore in Q1 FY26, compared to ₹79.08 lakh crore in Q1 FY25, indicating an 8.8% growth rate. Gross Value Added (GVA), which measures the total output of goods and services in the economy, is expected to reach 6.7%.

However, there are some concerns about potential risks to India's economic growth in the coming quarters. A Union Bank of India (UBI) report suggests that the economy may slow down due to potential implications from recently imposed US tariffs and a slower recovery in investment. The report projects that these factors could cause growth to fall below 6% in subsequent quarters. HSBC also noted that if tariffs remain for a year, GDP growth could slide by 0.7 percentage points, with labor-intensive sectors like jewellery, textiles and food items bearing the brunt.

Despite these potential headwinds, other reports suggest a more optimistic outlook. EY has reported that, despite the steep US tariffs, India’s economy may surpass that of the US in PPP terms by as early as 2028. The RBI has projected a real GDP growth of 6.5% for FY26, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%.

Going forward, the agriculture and services sectors are expected to be the primary growth catalysts. Agricultural GVA growth is projected to reach 6%, increasing from 5.4% in the previous quarter. Services GVA is forecasted to grow by 7.8%, driven by public administration (10.2%) and financial services (8.8%). On the other hand, the industrial sector shows signs of deceleration, with growth declining to 4.9% from 6.5% in Q4 FY25. Specifically, manufacturing growth is estimated at 4.1%, while construction maintains robust progress at 10.1%. Mining and electricity sectors are expected to experience negative growth.