India’s Economy Powers Ahead: 7.8% Q1 Growth & A New Growth Narrative

India’s economy is roaring back into global spotlight. In Q1 of FY 2025-26, real GDP grew by 7.8 %, beating most analysts’ expectations and reasserting India’s position as one of the fastest-growing large economies. 

wrote by PT

Key Drivers & Trends

• Strong domestic demand across sectors—services, manufacturing, construction—all showing healthy expansion.

• Industrial growth accelerating: India’s industrial production rose by 4.0 % in August 2025.

• Exports and manufacturing maintained momentum. From April to August 2025, merchandise exports rose ~2.5 % YoY.

• Policy tailwinds: Tax reforms, GST tweaks, infrastructure pushes, and prudent fiscal-monetary management are underpinning growth.

Outlook & Risks

• The OECD recently upgraded India’s 2025 growth projection to 6.7 % citing strong domestic demand and reforms. 

• The IMF has also revised its forecast to 6.4 %.

• Chief Economic Adviser expects actual growth could touch 7 %, with a fiscal deficit target of 4.4 % for FY26.

• But headwinds linger: global trade tensions, rising tariffs (especially from the US), and external demand slump pose risks.

India’s economic narrative in 2025 is being written with resilience. Backed by structural reforms, youthful demographics, and robust domestic demand, the nation is better insulated against external shocks than many peers. If policy momentum persists, India could be on its path toward becoming a $20+ trillion economy by 2030.