India's economy expanded 7.8% in the June quarter, according to data released by the Ministry of Statistics and Programme Implementation on August 31. This marks a slowdown from the 8.6% growth recorded in the preceding March quarter. Gross value added (GVA), which measures the value generated across economic activities, increased 8.2%, compared with 8.7% in the previous quarter.

Sectoral Performance

The services sector was the strongest contributor, growing 10% during the quarter, up from 8% in the same period a year earlier. Manufacturing activity grew 9.2%, while the construction sector expanded 7.7%. Trade, hotels, transport, communication and broadcasting services recorded growth of 8.5%.

The financial, real estate and professional services segment registered particularly strong growth of 12.1%. Public administration, defence and other services grew 7.5%. Agriculture, forestry and fishing posted more moderate growth of 3.6%.

Demand-Side Trends

On the expenditure side, private final consumption expenditure, a key indicator of household spending, increased 7.1%. Investment activity remained robust, with gross fixed capital formation rising 11.9% during the quarter. Government final consumption expenditure increased at a slower pace of 4.3%.

Context and Outlook

The latest figures come against the backdrop of the West Asia conflict and elevated energy prices, which have created external pressures for the Indian economy. However, government capital expenditure and domestic investment continued to support economic activity.

During the quarter, the Index of Industrial Production (IIP), services Purchasing Managers' Index (PMI), domestic aviation traffic, and bank credit accelerated sequentially from Q4FY26. However, manufacturing PMI, GST e-way bills, urban and rural auto sales, fuel consumption, and demand for rural job guarantees decelerated.

The Monthly Economic Review, released by the finance ministry, said the Indian economy sustained growth momentum during Q1FY27. It noted: "While steady domestic demand continues to support growth, some high-frequency indicators have seen a softening in momentum."