India’s Q1 GDP growth surprises at 7.8%, driven by services and manufacturing: SBI report

This compares with 6.5 percent growth in Q1 FY25. Gross Value Added (GVA) rose 7.6 percent, while nominal GDP growth stood at 8.8 percent.

The sharp upside surprise was led by robust performance in the services and manufacturing sectors.

Services grew 9.3 percent in Q1, with financial, real estate and professional services rising 9.5 percent, and trade, hotels, transport and communication posting 8.6 percent growth.

Manufacturing expanded 7.7 percent, supported by strong growth in over half the items in the IIP basket.

Together, these two sectors contributed nearly 85 percent of incremental GVA.

Agriculture grew 3.7 percent, while industry overall expanded 6.3 percent. Mining contracted 3.1 percent and electricity registered negligible growth of 0.5 percent. Construction, however, rose a healthy 7.6 percent.

On the expenditure side, private consumption increased 7 percent, government consumption rose 7.4 percent, and capital formation grew 7.8 percent.

SBI attributed part of the government consumption boost to base effects, as spending had declined in Q1 FY25.

Both Centre and states frontloaded capital expenditure—Centre’s capex touched 24.5 percent of budget estimates, while states’ spending also rose to 10.8 percent of budget estimates.

Corporate earnings also reflected momentum. Around 3,500 listed firms (excluding BFSI) posted revenue growth of 3.4 percent and EBITDA growth of 8.5 percent in Q1 FY26, while aggregate PAT for about 4,300 companies rose 12 percent.

Margins improved to an eight-quarter high of 15.7 percent.

The report noted that GST rationalisation remains a long-term reform priority and not merely a consumption booster.

It cautioned, however, that renewed US tariffs on Indian exports could affect sectors like textiles, gems and jewellery, chemicals and auto components, though festive demand and GST 2.0 may help offset some of the impact from Q3.