India's economic landscape is currently marked by impressive growth figures, with the Gross Domestic Product (GDP) expanding by a robust 7.8% in the April-June quarter of the fiscal year 2025-26. This performance exceeded expectations and represents the fastest growth rate recorded in the past five quarters. The growth was broadly based, with significant contributions from the services sector, which surged by 9.3%, manufacturing growing by 7.7%, construction by 7.6%, and agriculture by 3.7%.
Chief Economic Adviser (CEA) V. Anantha Nageswaran noted that the strong first-quarter numbers attest to the underlying resilience of the Indian economy and the lagged effects of various government initiatives. Union Minister Piyush Goyal echoed this sentiment, highlighting India's role as a "global growth engine" fueled by reforms and resilience.
Challenges from US Tariffs
Despite the optimistic growth outlook, a significant challenge has emerged with the United States imposing a steep 50% tariff on Indian goods, effective August 27, 2025. These tariffs, reportedly linked to India's continued imports of Russian oil, are expected to disproportionately affect labor-intensive sectors such as textiles, leather goods, seafood, and diamond polishing, and could potentially shave off 0.6 to 0.8 percentage points from India's growth over a year.
The imposition of these tariffs has already led to market turbulence, with the Indian stock market experiencing losses and sustained foreign portfolio investor (FPI) outflows in the week ending August 30. However, domestic institutional investor (DII) inflows and retail SIPs have shown resilience, cushioning some of the impact.
Government and RBI Responses
In response to the US tariffs, the Indian government is actively formulating short, medium, and long-term strategies to support exporters. These measures include easing Special Economic Zone (SEZ) norms, providing liquidity relief, building resilient supply chains, and enhancing market access through trade pacts and e-commerce export hubs.
Reserve Bank of India (RBI) Governor Sanjay Malhotra expressed strong confidence in India's economic future, stating that the country is poised to become the world's third-largest economy soon. He credited the success of the Pradhan Mantri Jan Dhan Yojana, a financial inclusion scheme that has seen over 55 crore accounts opened, for bolstering growth and integrating diverse populations into the nation's economic journey.
Other Key Developments
In other business news, Japanese and Indian business leaders have agreed to establish a framework for private-sector dialogue focused on enhancing economic security. This cooperation will address stable supply chains for critical materials, protection of important infrastructure, and joint research and development in advanced technologies. Additionally, the National Stock Exchange (NSE) conducted a mock trading session on August 30, 2025, as part of preparations for a mandatory software upgrade. On August 30, 2025, being a fifth Saturday, banking operations proceeded normally across India.