Domestic Fundamentals Strong But Global Headwinds a Concern

Domestic fundamentals, public capex, and robust growth in the services sector ensured real gross domestic product (GDP) growth of 7.8 per cent in the first quarter of 2025-26 (Q1FY26).

- MADHAVANKUTTY G

These numbers indicate not just an annual growth spurt but are also evidence of strong sequential momentum. Though a favourable base has played its part, sectoral performance too contributed.

A growth rate of close to 8 per cent in Q1 should help the fiscal end with a decent growth print. However, challenges posed by global headwinds will commence from the second quarter.

Growth has been fairly broad-based across all sectors, barring a few like mining and electricity, but the trajectory for the rest of FY26 depends on the extent to which policy initiatives mitigate external shocks.

Sectoral growth trends convey an overall growth momentum. At 3.7 per cent, agri & allied sectors more than doubled their pace over the previous year. This is attributable to good monsoons and technology initiatives. If monsoon does not play truant, we must expect 4.5-5 per cent to be the 'new normal' in our agri growth story.