India’s economy grew a stronger-than-expected 7.8 percent year-on-year in the January–March quarter, supported by robust domestic demand, investment activity and construction, even as external pressures from global geopolitical tensions weighed on parts of the economy.
The figure, released on Friday by the government, came in above market expectations of 7.2 percent in a Reuters poll and reflects continued resilience in Asia’s third-largest economy despite a challenging global environment.
Authorities also revised growth for the previous quarter upward to 8.0 percent, compared with an earlier estimate of 7.8 percent, highlighting stronger-than-expected underlying momentum.
The latest data show that India’s economy continues to be driven primarily by internal demand, with private investment, agriculture and construction helping to offset weaker external conditions linked to geopolitical tensions in the Middle East.
Investment-led growth
A key driver of performance in the January–March period was a sharp rise in private investment, which grew 10.8 percent, up from a revised 8.2 percent in the previous quarter — marking the strongest expansion in three years under the updated national accounts series.
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Construction activity also remained strong, expanding 8.4 percent, while manufacturing output grew 7.3 percent, albeit slower than the previous quarter’s revised 12.8 percent pace.
Agricultural output increased 3.6 percent, recovering from slower growth earlier in the fiscal year, and helping to support rural incomes in an economy where more than 40 percent of the workforce remains employed in farming.
Consumption and government spending
Private consumption, which accounts for more than half of India’s gross domestic product, grew 7.1 percent, though this represented a slowdown from the previous quarter’s revised 8.2 percent expansion.
Government spending increased by 4.9 percent, slightly higher than the previous quarter, providing additional support to overall growth.
Gross value added (GVA), a measure of economic activity that excludes taxes and subsidies, rose 7.9 percent, underscoring broad-based expansion across key sectors.
External pressures and outlook
Despite the strong quarterly performance, economists warn that external risks remain significant, particularly from geopolitical tensions in the Middle East, which have affected global energy prices and supply chains.
India, which is heavily dependent on imported crude oil, remains exposed to volatility in global energy markets. Rising oil prices have already contributed to inflationary pressures and concerns over the country’s fiscal and current account balances.
The central bank has signalled that growth could moderate in the current fiscal year, projecting expansion of around 6.6 percent, as inflationary pressures and currency weakness weigh on momentum.
Analysts also point to risks from uneven monsoon rainfall, which could affect agricultural output and rural demand in the months ahead.
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Balanced momentum
Economists say the latest data highlight a shift in the structure of growth, with investment activity increasingly compensating for softer consumption trends.
While private spending remains a major pillar of the economy, stronger capital formation suggests businesses are continuing to expand capacity despite global uncertainty.
However, some analysts caution that momentum may already be starting to slow, with growth expected to moderate in subsequent quarters if external conditions remain challenging.
For now, India remains one of the fastest-growing major economies globally, underpinned by strong domestic fundamentals even as it navigates a more uncertain international environment.
