New Delhi, Aug 29 (PTI) India's economy grew by a stronger-than-expected 7.8 per cent in April-June, its fastest pace in five quarters, before US President Donald Trump imposed tariffs that now cloud the outlook, threatening key exports like textiles.

The gross domestic product (GDP) growth in the first quarter of the ongoing fiscal year was mainly driven by good showing by the farm sector, and also helped by services like trade, hotel, financial and real estate, according to the latest government data released on Friday.

The previous highest pace of growth in the country's GDP was recorded at 8.4 per cent during January-March 2024, as per the data.

India remains the fastest-growing major economy, as China's GDP growth in the April-June period was 5.2 per cent.

The agriculture sector recorded a 3.7 per cent growth, up from 1.5 per cent in the April-June period of 2024-25, as per the data released by the National Statistics Office (NSO).

However, manufacturing sector growth increased marginally at 7.7 per cent in the first quarter of FY26 compared to 7.6 per cent recorded in the year-ago period.

Earlier this month, the Reserve Bank of India had projected the real GDP growth rate for 2025-26 at 6.5 per cent, with 6.5 per cent in Q1, 6.7 per cent in Q2, 6.6 per cent in Q3, and 6.3 per cent in Q4.

Commenting on the official data, Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA, stated that after the unexpectedly strong Q1 FY2026, a lower YoY (year on year) momentum of government capex and the looming hit to exports from the US tariff and penalties, would dampen growth prints in the coming quarters, notwithstanding the balm offered by GST rationalisation.

"Amidst continuing uncertainty, we maintain our baseline GDP growth forecast at 6.0 per cent for FY2026. The sharper than expected GDP growth print, which represents an acceleration over the previous quarter, has doused any expectations that the tariff related turmoil could prompt monetary easing in the October 2025 policy review," she added.

The NSO statement said, "Real GDP or GDP at Constant Prices in Q1 of FY 2025-26 is estimated at Rs 47.89 lakh crore, against Rs 44.42 lakh crore in Q1 of FY 2024-25, registering a growth rate of 7.8 per cent. Nominal GDP or GDP at Current Prices in Q1 of FY 2025-26 is estimated at Rs 86.05 lakh crore, against Rs 79.08 lakh crore in Q1 of FY 2024-25, showing a growth rate of 8.8 per cent." It also stated that mining & quarrying (-3.1 per cent) and electricity, gas, water supply and other utility services sector (0.5 per cent) has seen moderated real growth rate during Q1 of FY 2025-26.

Tertiary sector has recorded a substantial growth rate of 9.3 per cent at Constant Prices in Q1 of FY2025-26, over the growth rate of 6.8 per cent in Q1 of FY 2024-25.

Tertiary sector includes services like trade, hotel, transport, financial institutions, real estate, professional services, public administration and defence.

NSO also stated that the Government Final Consumption Expenditure (GFCE) has bounced back, registering a 9.7 per cent growth rate in nominal terms during Q1 of FY 2025-26, over the growth rate of 4.0 per cent in Q1 of FY 2024-25.

Real Private Final Consumption Expenditure (PFCE) has reported a 7.0 per cent growth rate during the reporting quarter as compared to the 8.3 per cent growth rate in the corresponding period of previous financial year.

Gross Fixed Capital Formation (GFCF) has recorded a 7.8 per cent growth rate at Constant Prices, as against the growth rate of 6.7 per cent in Q1 of FY25.

The discrepancies (differences in values calculated using different methods of GDP estimation) jumped to Rs 1.11 lakh crore during the first quarter of this fiscal from Rs 33,384 crore in the same period year ago. PTI KKS HVA

GDP growth strengthens but external tariffs and export risks cloud the near term growth and monetary policy outlook. Real GDP grew strongly in Q1 FY2025-26 led by agriculture and a substantial rise in the tertiary sector, with manufacturing growth marginally higher and mining and utilities moderating. Nominal GDP increased notably. Government final consumption rebounded, private final consumption held up though slightly lower year on year, and gross fixed capital formation strengthened. The data highlights risks from external tariffs that may hit exports and dampen upcoming growth, and notes that the stronger quarterly print bears on the near term monetary policy outlook.