Q1 GDP Growth Driven Strongly by Manufacturing and Services Sectors: Report

India's GDP clocked a robust 7.8 per cent growth in the first quarter (Q1 FY26), which is way higher than the estimated 6.6 per cent, led by the strong expansion in the manufacturing sector and continued momentum in services, said a report issued on Tuesday.

Each of the three heads under the services – Trade, Hotels, Transport, and Commerce and Broadcasting Services (8.6 per cent compared to estimated 6 per cent), Financial, Real Estate, and Professional Services (9.5 per cent in Q1FY26 compared to 7.8 per cent in Q4FY25), and Public Administration and Defence (9.8 per cent compared to 8.7 per cent) did well," CareEdge Ratings mentioned in its report.

While the robust services growth was to some extent captured by high-frequency indicators like rising central revenue spending, strong services exports, higher e-way bill collection, and enhanced cargo traffic, the sector performed better than anticipated on the whole.

Industrial production saw the manufacturing sector recording a significant expansion of 7.7 per cent over 4.8 per cent, which is probable on the back of increasing domestic consumption and frontloading of imports by developed economies in advance of increased tariffs.

This sharp increase in manufacturing is a welcome development," the report noted.

But improvements in manufacturing were partially offset by a sharp decline in mining (-3.1 per cent against 2.5 per cent) and weaker growth in utilities (0.5 per cent compared with 5.4 per cent), which kept overall industrial growth in check. The premature onset of the monsoon also impacted mining activities, the report further added.

Agricultural growth decelerated to 3.7 per cent in Q1 FY26 from 5.4 per cent, contrary to expectations. However, a good monsoon and robust Kharif sowing are likely to sustain farm production in the future.

Gross Value Added (GVA) growth came in at 7.6 per cent for Q1 FY26 overall.

The report indicated that the growth gap between GDP and GVA was as expected, with a growth in indirect taxes prevailing over the increase in subsidies.