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India's economy expanded by a stronger-than-expected 7.8% year-on-year during the January-March quarter, supported by improved agricultural output and robust construction activity. Growth was slightly lower than the revised 8.0% recorded in the previous quarter but remained among the strongest globally. Gross Value Added (GVA), a key indicator of underlying economic activity, rose 7.9%. Farm sector growth accelerated to 3.6%, while construction activity strengthened significantly. However, risks remain from elevated crude oil prices, ongoing Middle East geopolitical tensions, inflationary pressures, rupee weakness, and below-normal monsoon prospects, which could weigh on economic growth in the current fiscal year.

Key Highlights

• India's GDP grew 7.8% in January-March, exceeding market expectations.
• Agricultural growth accelerated to 3.6% from 1.7% in the previous quarter.
• Construction activity expanded 8.4%, supporting overall economic growth.
• Full-year FY2025-26 GDP growth was revised up to 7.7%.
• Rising crude oil prices and weak monsoon risks could slow future growth.

India's economy maintained strong momentum during the January-March quarter, recording annual GDP growth of 7.8%, supported by resilient agricultural performance and robust construction activity. Although slightly below the revised 8.0% growth recorded in the previous quarter, the latest reading highlights the continued strength of domestic economic fundamentals despite a challenging global environment.

A major contributor to growth was the agricultural sector, where output expanded by 3.6% compared with 1.7% growth in the preceding quarter. Improved farm performance provided support to rural incomes and consumption, helping offset external economic pressures. The construction sector also remained a key growth driver, expanding by 8.4%, reflecting sustained infrastructure development and strong investment activity across the economy.

Gross Value Added (GVA), which offers a clearer measure of underlying economic activity by excluding taxes and subsidies, increased by 7.9% during the quarter. Meanwhile, manufacturing growth moderated to 7.3% from the previous quarter's revised 12.8%, indicating some slowdown in industrial momentum despite remaining in positive territory.

For the full financial year ending March 2026, India's economic growth was estimated at 7.7%, slightly higher than earlier projections. The performance reinforces India's position among the fastest-growing major economies globally.

However, several challenges could affect growth prospects going forward. Ongoing geopolitical tensions in the Middle East have increased crude oil price risks, posing concerns for inflation and India's import bill. As one of the world's largest crude oil importers, India remains vulnerable to disruptions in energy markets. Additionally, forecasts of below-normal monsoon rainfall and the possibility of prolonged dry conditions could affect agricultural output and rural demand in the coming months.

India's strong economic growth continues to be supported by agriculture and infrastructure activity, though rising energy costs, inflation pressures, and weather-related risks may create challenges for sustaining momentum ahead.

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