August 30, 2025 07:42 AM IST First published on: Aug 30, 2025 at 07:42 AM ISTThe Indian economy grew at a healthy 7.8 per cent in the first quarter of the ongoing financial year, surpassing the expectations of most analysts by a significant margin. Growth in the quarter was even higher than the RBI’s most recent estimate of 6.5 per cent. Value added, which strips away net taxes on products, also grew at a strong 7.6 per cent, buoyed by the strong performance of the services sector. But the outlook for growth continues to be clouded.The disaggregated data show that agriculture continued to fare well, growing at 3.7 per cent in the quarter. The area under kharif cultivation is up on the back of timely and well-distributed monsoon rains. This bodes well for agri output and rural consumption. The manufacturing sector grew at a healthy 7.7 per cent in the first quarter, and within services, the three broad sectors grew at a rapid pace. Private consumption and investment activity also fared well, as did government spending, which had contracted over the same period last year. As per ICRA, the Centre’s capital spending rose by a steep 52 per cent during the quarter, while that of 24 states rose by 23 per cent However, as per a report from Bank of Baroda economists, net sales of a sample of 2,545 companies grew by just 4.9 per cent in the first quarter. Excluding the banking financial services, and insurance firms, growth was even lower at 3.6 per cent, and excluding a company in the oil sector, profits after tax grew by 8.3 per cent. As per the GDP data, in nominal terms, economic growth actually slowed down to 8.8 per cent from 9.7 per cent in the first quarter of last year, pointing to a low deflator.AdvertisementThe underlying momentum in the economy will now be shaped by several forces. Following the 50 per cent tariff rate coming into effect from August 27, India’s exports to the US will be hit. This will have implications for employment, income, and consumption. Diversifying towards other markets will take time. On the other hand, a low interest rate regime, along with the rationalisation of tax rates under GST could help stimulate household demand. However, some consumption may get deferred in the immediate term. Some analysts have already begun marking down their growth forecasts for the year.