New Delhi: The GDP growth in the first quarter (Q1 FY26) reached 7.8 percent, significantly surpassing the estimated 6.6 percent, driven by a notable increase in the manufacturing sector and sustained momentum in services, according to a report released on Tuesday. Within the services sector, all three categories performed well: Trade, Hotels, Transport, and Commerce and Broadcasting Services increased by 8.6 percent, exceeding the estimated 6 percent; Financial, Real Estate, and Professional Services grew by 9.5 percent compared to 7.8 percent in Q4 FY25; and Public Administration and Defence rose by 9.8 percent against 8.7 percent.
CareEdge Ratings highlighted that the robust performance in services was reflected in high-frequency indicators such as strong central revenue expenditure growth, healthy services exports, increased e-way bill collections, and cargo traffic, leading to overall sector growth beyond expectations. In the manufacturing sector, growth reached 7.7 percent compared to 4.8 percent, likely bolstered by improving domestic consumption and advanced imports by developed economies before higher tariffs took effect. This significant rise in manufacturing is viewed positively. However, these gains were partially countered by a notable decline in mining, which contracted by 3.1 percent compared to a growth of 2.5 percent, and a slowdown in utilities, which grew by only 0.5 percent versus 5.4 percent.
The report attributed the decline in mining activity to the early onset of the monsoon. Contrary to predictions, agricultural growth also slowed in Q1 FY26 to 3.7 percent from 5.4 percent, though a favorable monsoon and strong Kharif sowing are expected to bolster agricultural growth in the future. Overall, Gross Value Added (GVA) growth was recorded at 7.6 percent for Q1 FY26, with the positive difference between GDP and GVA aligning with expectations, as the growth in indirect taxes outpaced subsidies.
