India’s economy grows 7.8%, topping forecasts on farm, construction gains

India’s economy expanded 7.8% in the January-March quarter, a stronger-than-expected pace that underscored how much domestic activity has been shielding growth from weaker external demand. The official reading came in well above the 7.2% economists had expected and followed a revised 8.0% gain in the previous quarter.

The details show a growth mix that is still resilient, but not evenly spread. Services rose 9.9% in the quarter, while construction advanced 8.4% and manufacturing grew 7.3%. The primary sector lagged behind at 3.8%, with agriculture, livestock, forestry and fishing up 3.6%. That split suggests India’s momentum still leans on urban services, infrastructure spending and farm output, rather than a synchronized pickup across the economy.

For policymakers, that matters. The Reserve Bank of India kept its repo rate at 5.25% on June 5 and held a neutral stance, citing global uncertainty, West Asia conflict risks and inflation pressures. It also trimmed its FY27 GDP growth projection to 6.6% and raised its inflation forecast, signaling that the central bank sees the external environment as a growing constraint even after the strong quarterly print.

The year as a whole still looks robust by major-economy standards. The government now expects full-year growth for the fiscal year ended in March to have reached 7.7%, slightly higher than its February estimate of 7.6%. Real GDP for FY26 stood at Rs 323.12 lakh crore, up from Rs 299.89 lakh crore in FY25, while nominal GDP climbed 8.9% to Rs 346.36 lakh crore.

The latest reading also reflects a statistical reset. It was the second GDP print under revised national accounts data, which use an updated base year and widened sources. That makes comparisons with older series less straightforward, but the quarter still points to an economy that is proving more durable than many forecasters expected.

The harder question is whether that durability is broad enough to last. Strong headline growth can coexist with uneven gains for households and job seekers, especially when services and construction do more of the heavy lifting than agriculture or export-linked industries. For now, India’s growth story still has internal strength. Whether it can hold if shipping, energy and trade conditions worsen is the test that now matters most.