India grows at fastest pace in four quarters on revival in investments

The Indian economy grew at the fastest pace in four quarters in the three months to March on a revival in investments and a strong services sector, government data released on Friday showed.

Gross domestic product (GDP) grew at 7.4% in the January-to-March period from a year ago, higher than most analysts’ estimates, pushing the full-year GDP growth to 6.5%, statistics ministry data showed.

The construction sector, including roads, buildings, and infrastructure, grew the fastest—up 9.4% for the full year and 10.8% in the past quarter, up from 7.9% in the previous quarter.

Government services such as administration and defense rose 8.9% over the year.

Finance and real estate services also performed solidly with 7.2% growth.

Farming and related rural sectors, which struggled in previous years, bounced back with 4.4% growth, and even more in the past quarter.

The manufacturing sector expanded 4.8% in the January-to-March period when compared with a revised expansion of 3.6% in the previous quarter.

The data showed that gross fixed capital formation, a proxy for business investments on factories, machinery, and infrastructure, climbed 9.4% in the final quarter of the fiscal from a year ago, against 5.2% in the previous quarter.

Private consumption, which constitutes about 57% of GDP, slowed to a five-quarter low on slowing urban demand.

Chief economic adviser V. Anantha Nageswaran said data indicates capital formation is “very steady.”

“India’s growth is holding up in a growth-scarce environment,” Nageswaran said, adding India outshone other large and contemporary economies.

The Reserve Bank of India (RBI) sees GDP growing 6.5% in the current fiscal year.

The January-to-March quarter also saw a return of the wide divergence in GDP and gross value added, or GVA.

GVA, seen as a more accurate measure of underlying economic activity, grew 6.8% during the quarter against a revised 6.5% expansion in the previous quarter.

GVA excludes indirect taxes and government subsidies, which tend to be volatile.

India’s growth outlook for the current fiscal faces challenges given a global slowdown and US-led tariff woes, analysts said.

US President Donald Trump has proposed reciprocal tariffs of 26% on Indian imports–on hold until 9 July as trade talks continue.

Retail inflation, which eased to a six-year low of 3.16% in April, and a favorable monsoon, is expected to keep food prices in check and pave the way for RBI to further cut its policy repo rate.

RBI has cut interest rates by 50 basis points over its last two policy meetings, and is expected to cut further in its next meeting on 6 June.