New Delhi: India’s economy accelerated beyond expectations in the April–June quarter of 2025, with GDP growth climbing to a five-quarter high of 7.8%, according to fresh data from the Ministry of Statistics released on Friday. This robust performance surpasses the 7.4% growth recorded in January–March 2025 and the 6.5% growth seen in the same quarter last year.
This rapid improvement strengthens India’s standing as the world’s fastest-growing large economy at a time when global markets are reeling from turbulence. The surge comes despite the challenges of the 50% tariff imposed by the United States on Indian goods beginning August 27, following President Donald Trump’s decision to double levies in retaliation to New Delhi’s continued purchase of Russian oil and defense equipment.
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Earlier this month, the Reserve Bank of India had forecast a slowdown, predicting growth at 6.5% for April–June. Economists too expected a figure closer to 7%, but India comfortably beat these projections. Chief Economic Advisor V. Anantha Nageswaran noted that while tariff uncertainties persist, the government remains optimistic about achieving its full-year GDP growth target of 6.3–6.8%.
India GDP Growth 2025 Powered by Strong Services Sector
The services sector emerged as the biggest driver of growth, expanding by 9.3%, its highest in two years. The HSBC Flash India Services PMI surged to a record 65.6 in August, indicating continued momentum.
Key segments showed sharp improvements:
- Trade, Hotels, Transport & Communication services grew 8.6%, up from 6% in the previous quarter.
- Financial, Real Estate & Professional Services surged 9.5%, compared to 7.8% earlier.
- Public Administration, Defence & Other Services posted a remarkable 9.8% growth.
Overall Gross Value Added (GVA), considered a more accurate indicator of economic activity, stood at 7.6%, the highest in six quarters.
Agriculture, Manufacturing and Construction Add to Momentum
Beyond services, agriculture and manufacturing provided crucial support to GDP. Agriculture grew 3.7%, more than doubling last year’s growth rate of 1.5%. Manufacturing rose 7.7%, improving significantly from 4.8% in January–March.
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However, not all sectors fared well. Heavy rainfall during the quarter impacted mining activity, leading to a contraction in ‘Mining & Quarrying.’ The same weather conditions reduced power demand, resulting in just 0.5% growth in the utilities sector. Construction growth slipped to 7.6%, a nine-quarter low.
Consumption and Investments Push Economy Ahead
Private consumption also played a strong role, rising 7% compared to 6% in the previous quarter. Though slightly lower than last year’s 8.3%, this indicates resilient consumer demand.
Gross Fixed Capital Formation (GFCF), a proxy for investment, rose 7.8%, reflecting strong infrastructure and industrial spending. Government consumption rebounded sharply by 7.4%, reversing the contraction of 1.8% in January–March.
These numbers show that both household demand and public spending are reinforcing India’s growth story despite global headwinds.
Policymakers Welcome Boost Despite Tariff Concerns
For policymakers, this growth spurt offers a relief amid concerns of slowing global trade. Prime Minister Narendra Modi recently announced reforms, including GST rationalisation and income tax reductions, aimed at spurring consumption and investments further.
Experts believe risks remain due to US tariffs, but India’s structural reforms and moderate inflation will help sustain momentum. According to Sujan Hajra, Chief Economist at Anand Rathi Financial Services, full-year growth is expected to average around 6.5%, while corporate earnings are likely to expand by 11–13%, supported by nominal GDP growth in high single digits.
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