India Records 7.8% GDP Growth in April-June Driven by Manufacturing and Investment

India's economy grew by 7.8% year-on-year in the April-June quarter, surpassing both Reuters poll expectations and the Reserve Bank of India's projections. The growth was primarily driven by strong manufacturing and investment activity, which helped offset weaknesses in mining and consumer-facing services.

NEW DELHI — India's economy expanded by 7.8% year-on-year during the April-June quarter, according to government data released on Monday. The growth rate exceeded the 7.1% expectation predicted by economists in a Reuters poll and outpaced the Reserve Bank of India's projection of 7%. However, the figure was slower than the revised 8.6% growth recorded in the previous three months.

The stronger-than-expected economic performance was supported by a surge in investment and manufacturing activity, which successfully offset weaknesses observed in the mining sector and consumer-facing services. Gross value added (GVA), which strips out volatile components like indirect taxes and subsidies to provide a more accurate measure of underlying economic activity, grew by 8.2% during the quarter.

Sector-wise, manufacturing grew at 9.2%, up from 8.3% in the same period last year. Meanwhile, the financial services sector registered robust growth of 12.1%, compared to 8.8% previously, supported by strong growth in bank credit. Personal consumption rose by 7.1%, and investment grew by nearly 12%.

According to the Reserve Bank of India’s August bulletin, credit growth across the farm, industry, and services sectors remained healthy, reaching its highest loan growth in over a decade at 18.3% at the end of the June quarter.

Despite recent goods and services tax cuts and income tax reductions aimed at boosting consumer demand in Asia’s third-largest economy, economists note that external factors continue to pose challenges. Specifically, the ongoing six-month-long Middle East conflict is reportedly keeping companies cautious about investing further in capacity expansion.

"India's 7.8% GDP growth in the April-June quarter highlights underlying economic resilience, driven notably by strong manufacturing and credit growth. While a nearly 12% increase in investment and robust bank lending reflect positive business sentiment, entrepreneurs and corporations must remain cautious. External headwinds, such as ongoing geopolitical tensions in the Middle East, continue to impact capacity expansion decisions. For businesses and startups operating in this environment, maintaining disciplined capital allocation while leveraging healthy domestic credit conditions will be key to sustaining long-term growth." — Dr. Shishir Gupta, Founder & CEO, StartupLanes