India's economy started the financial year 2025-26 on a strong note, clocking a growth rate estimated between 6.8% and 7% for the first quarter. This uplift surpasses the Reserve Bank of India's more conservative estimate of 6.5%, according to a recent research report published by the State Bank of India (SBI). The impressive performance highlights a resilient economic momentum, underpinned by robust demand and government spending.

SBI's analysis revealed a real GDP growth rate of approximately 6.9% in Q1, supported by a Gross Value Added (GVA) growth around 6.5%. This growth trajectory aligns well with patterns observed in previous quarters, reflecting steady adjustments and underlying economic stability. However, despite this strong start, the SBI report projects a moderation in quarterly growth rates as the fiscal year progresses, with expectations of 6.5% in Q2 and a gradual decline to nearly 6.1% by Q4 2025-26.

One of the key drivers for this early growth phase is higher discretionary consumer spending and demand-led expansion, which have helped revive economic activity across various sectors. Government capital expenditure has also played a crucial role, with the report pointing out a significant elasticity factor—indicating that public investments are creating a larger impact on GDP than before. Nonetheless, a cautious note was sounded regarding private capital expenditure, which remains subdued. The report emphasized the urgency for increased private sector investment to complement public spending and achieve sustainable long-term growth.

Global economic uncertainties, including trade tensions and tariff impacts, add an external layer of complexity. The SBI report warns that these headwinds may dampen investment appetite and earnings prospects in subsequent quarters. Yet, India's macroeconomic fundamentals remain strong, allowing it to sustain a relatively higher growth level compared to many peers globally.

Inflationary pressures are low, and interestingly, SBI noted a narrowing gap between nominal and real GDP growth, indicating controlled inflation and a healthier economic environment during the quarter. This dynamic may somewhat mask deceleration in the growth rate if viewed solely through nominal figures, but the underlying real growth signals a solid foundation. This forecast places India well on its path as one of the fastest-growing major economies worldwide, demonstrating its resilience amid a complicated global landscape. The challenge ahead will be to nurture private investment while maintaining the momentum through prudent policy choices and strategic interventions.