Growth Looks Robust

India’s Q1 FY26 GDP growth of 7.8 per cent is more than a headline number. It is a reaffirmation of India’s resilience, reform-driven momentum, and a clear sign of renewal at a time when the global economy is caught in turbulence.

The composition of this growth is encouraging:

The strong services growth, with financial and professional services growing near 9.5 per cent, and trade-hotel-transport sectors surging 8.6 per cent, shows that urban India’s demand drivers are back on track.

The 7.7 per cent manufacturing growth is proof of the PLI scheme’s success. Agriculture growing at 3.7 per cent is sign of strengthening rural incomes and demand, while construction’s 7.6 per cent growth reflects infra and government capex spend is translating into jobs and assets on the ground.

These results are clearly the outcome of a policy architecture in motion:

PLI incentives are sparking shop floors and new investments.

Rural reforms and higher MSPs are restoring farmer confidence.

The Gati Shakti infrastructure programme is knitting together supply chains and reducing costs.

Digitalisation has made payments frictionless and allowed fintech and logistics platforms to transform the way businesses operate.

Add to this GST rationalisation, decriminalisation of business laws, and fiscal prudence, and we see how systematically India has been repositioned. Macroeconomic credibility has provided the runway, while structural reforms are ensuring the take-off.

The next steps

First, crowding in private investment. Corporate deleveraging is behind us. What is needed now is deeper capital markets, easier land and labour frameworks, and financing channels for mid-size manufacturers and MSMEs.

Second, MSMEs must be digitally scaled, integrated into global supply chains, and supported with targeted skilling aligned to Industry 4.0.

Third, fortifying exports. With global trade slowing and tariff pressures increasing, especially from the US, India must be proactive.

Accelerating new trade deals, particularly with the EU, and reviewing older ones will expand our market access.

Fourth, sunrise sectors. Renewables, semiconductors, green hydrogen, defence, and medical devices are the future. The PLIs have laid a base, but sharper targeting and integration with global demand are required to make India a key player in global value chains.

Fifth, fiscal discipline and disinvestment. With nominal GDP moderating, revenue buoyancy must be strengthened. The timely rollout of GST 2.0 — expected to yield $10-12 billion annually — is crucial. Equally, credible disinvestment will not only provide fiscal space but also improve productivity in key sectors.

Strong foundation

At CII, we have consistently emphasised competitiveness at every level. Our recent paper on Policies for a Competitive India laid out more than 250 recommendations. Many are already being acted upon by the government.

The real impact will come from micro-level interventions: reducing compliance costs for smaller firms, enabling State-level deregulation, and driving faster energy and trade reforms. CII is mobilising corporates, State councils, and policy boards to convert these reforms into real investment, jobs, and opportunities.

Challenges will remain — global headwinds, climate risks, and the need for skilling and infrastructure — but India has the resilience to navigate them.

India’s Q1 GDP growth is evidence of an economy that has embraced reform, resilience, and renewal.

The government’s commitment to reform, coupled with industry’s optimism, gives us a strong foundation for the next phase.

The article first appeared in The Hindu Business Line, dated 5 September 2025.