India's economy expanded by 7.7 per cent in FY 2025-26, cementing its standing as the world's fastest-growing major economy, according to data released by the Union government on 2 July 2026. Growth accelerated further in the final quarter, with real GDP clocking 7.8 per cent in Q4 FY26, up from 7 per cent in the same quarter a year earlier, driven by manufacturing, services, consumption and investment.

Manufacturing and Services Momentum

The HSBC India Manufacturing PMI stood at 54.2 in June 2026, holding above the expansion threshold of 50 for the 37th consecutive month. The reading signals continued growth in output, new orders, employment and purchasing activity, reflecting resilient domestic demand and positive business confidence despite global headwinds.

On the services side, the HSBC India Services PMI Business Activity Index climbed from 58.8 in April to 59.8 in May 2026 — its strongest reading since November 2025. Meanwhile, the Index of Industrial Production (IIP) accelerated from 4.9 per cent in April to a five-month high of 5.1 per cent in May, led by a 5.5 per cent expansion in manufacturing and 9.9 per cent growth in electricity and gas supply. Within manufacturing, sectors including motor vehicles and electrical equipment posted double-digit growth.

Government Capex and Tax Collections

The Centre's capital expenditure push continued strongly into FY 2026-27. In April-May 2026, capex stood at ₹2.51 lakh crore, up from ₹2.21 lakh crore in the same period last year — an increase of roughly ₹29,650 crore in just two months. Spending is concentrated in roads, railways, telecom, defence and other core infrastructure sectors.

Tax revenues kept pace with growth. Gross GST collections rose 13.9 per cent year-on-year to approximately ₹1.95 lakh crore in June 2026, compared with ₹1.71 lakh crore in June 2025. Net direct tax collections jumped 14.64 per cent to ₹5.21 lakh crore in the current fiscal through 17 June 2026, supported by healthy corporate and non-corporate tax receipts.

Trade, Logistics and Auto Sales

Trade and logistics activity remained buoyant, with e-way bill generation rising 10.9 per cent year-on-year in May 2026, reflecting sustained movement of goods across the country. On the demand side, capital goods output grew by 12.9 per cent, pointing to sustained investment momentum and expanding industrial capacity.

The automobile sector delivered a record quarter. Vehicle retail sales in April 2026 reached 26.11 lakh units — the highest-ever April figure for India's auto retail market. Rural demand remained a key driver, with rural automobile sales growing 7.8 per cent in May 2026, even against a high base from the previous year.

Fiscal Consolidation Amid Global Risks

Easing crude oil and fertiliser prices have provided the Centre some relief, supporting its commitment to the FY 2026-27 fiscal consolidation roadmap, despite temporary pressures from global energy markets and the West Asia situation. Notably, this broad-based strength across indicators comes at a time when several major economies are grappling with slowing growth and tightening financial conditions. With the monsoon season under way, rural consumption trends and agricultural output will be closely watched as the next set of quarterly data takes shape.