India’s 7.8% Surge: Growth With Resilience or Growth With Risks?

By Sanjeev Oak

India’s economy clocked a robust 7.8% growth in Q1 2025–26, reaffirming its position as the world’s fastest-growing major economy. Powered by manufacturing revival, services momentum, and strong domestic demand, this growth signals resilience amid global headwinds and geopolitical uncertainty.

The latest GDP numbers bring cheer to policymakers and industry alike. India’s economy expanded at a robust 7.8% in the first quarter of FY25, consolidating its place as the world’s fastest-growing major economy. But behind the celebratory headlines lies a more layered story of resilience, consumption shifts, and looming global headwinds.

The growth story in numbers

The Ministry of Statistics data shows:

• GDP growth: 7.8% in Q1 FY25, compared to 8.2% in the same quarter last year.
• Gross Value Added (GVA): 7.5%, suggesting broad-based sectoral momentum.
• Agriculture: 3.5%, slower due to erratic pre-monsoon patterns.
• Manufacturing: 8.6%, a strong rebound reflecting PLI scheme benefits and resilient domestic demand.
• Construction: 9.4%, continuing as one of the economy’s key engines, aided by government infrastructure push.
• Financial, real estate, and professional services: 8.2%, benefiting from credit expansion and fintech penetration.

“India has posted growth numbers that the West can only envy—but the sustainability question cannot be brushed aside.”

Drivers of momentum

Three forces are evident in the current growth cycle. First, public capex remains the anchor. The Centre’s ₹11.1 lakh crore capex outlay for FY25 is already driving construction, steel, and cement demand. Second, private consumption has revived, particularly in urban India, supported by strong auto and housing sales. Passenger vehicle sales touched record highs, and housing loan disbursals grew by double digits in the quarter. Third, manufacturing revival signals early success of Atmanirbhar Bharat and PLI-linked initiatives, with electronics, semiconductors, and pharma leading.

The caution lights

Yet, the data also highlights vulnerabilities. Rural consumption remains uneven. Wage growth in the farm sector has not kept pace with inflation, while erratic rains have capped agriculture’s contribution. Exports contracted marginally amid weak global demand, with merchandise shipments slowing in textiles and gems-jewellery.

“India’s growth engine is firing, but one cylinder—exports—is still sputtering.”

Inflation adds another layer of concern. While headline CPI moderated to 4.6% in July, food inflation remains sticky at over 8%. This limits the Reserve Bank’s room for further rate cuts despite industry demand for lower borrowing costs.

Global headwinds, local buffers

Externally, geopolitical tensions, volatile crude prices, and slowing Chinese demand cloud the outlook. The World Bank projects global growth at just 2.6% for 2025, compared to India’s 6.5–7% forecast by most agencies. This divergence, while making India a relative outperformer, also means it will have to bear disproportionate expectations from global investors.

Yet, there are buffers. Forex reserves at $675 billion, the rupee’s relative stability, and buoyant GST collections (₹1.79 lakh crore in July 2025, a 12% y-o-y rise) provide macroeconomic comfort. Bank credit growth, at 14%, shows continued confidence in business expansion.

A tale of two Indias

One structural concern remains—the divergence between urban and rural growth. FMCG companies continue to report double-digit volume growth in metros, while rural markets show only modest upticks. The gap underlines the urgency of boosting farm productivity, rural infrastructure, and job creation beyond construction.

“The Indian economy in 2025 is a tale of two Indias—urban centres booming, villages still waiting.”

The road ahead

Looking ahead, sustaining 7%+ growth will require three policy anchors:

1. Reviving rural demand through targeted schemes, irrigation investments, and value-chain support for farmers.
2. Expanding manufacturing depth, particularly in high-tech sectors, to reduce import dependence.
3. Managing inflation and energy security, especially as crude prices and food supply disruptions remain unpredictable.

India has demonstrated that it can defy global gloom with domestic strength. But to truly claim economic leadership, the growth must be inclusive, investment-driven, and job-generating.

“The headline number is impressive. The quality of growth will define whether this is a sprint or a marathon.”

Final words

At 7.8%, India has once again delivered what the world’s advanced economies cannot. The task now is to ensure that this growth does not remain confined to stock market indices and urban high-rises, but filters down to farms, villages, and small enterprises. Only then will the celebration of numbers translate into the celebration of lives.