From Cars to Construction: The Hidden Engines Behind India’s 7% Growth

This growth has not been uniform. Some sectors surged ahead, while others faced headwinds. Let us examine in detail which sectors drove the economy forward and which struggled.

1. Manufacturing and Industrial Growth

• The manufacturing sector grew strongly, with an estimated expansion of 8%–8.5%.
• Automobile production was a key driver, especially due to new EV launches and increased demand for commercial vehicles. Passenger car sales surged in both domestic and export markets.
• Electronics and semiconductors also contributed significantly, with India emerging as a preferred hub for assembly and chip packaging after global supply chain shifts.
• Cement and steel output rose due to heavy government spending on roads, highways, and affordable housing.
• Textiles and small-scale manufacturing remained under pressure due to US and EU tariff issues, but domestic demand offered some relief.

2. Services Sector: The Biggest Contributor

• The services industry once again emerged as the largest contributor, growing around 9%–9.5%.
• IT and software exports grew by nearly 7%, with global clients outsourcing more amid cost pressures. Cloud computing, cybersecurity, and AI services dominated order books.
• Banking and financial services (BFSI) posted double-digit growth, fueled by rising credit demand from retail loans, housing finance, and SME lending.
• Hospitality, tourism, and transport witnessed a major rebound, with domestic travel booming after the pandemic lull. Airline passenger traffic touched record levels, driving revenue for allied industries.
• Real estate services gained momentum with strong housing demand in Tier-1 and Tier-2 cities.

3. Agriculture and Rural Economy

• The agriculture sector saw moderate growth of around 3%–3.5%.
• While the wheat and paddy crops benefitted from early rainfall in some regions, irregular monsoon patterns created stress in states like Maharashtra and Karnataka.
• Government procurement at higher MSPs gave farmers confidence, boosting rural spending power.
• Fertiliser subsidies and targeted rural schemes kept consumption stable, but experts warn of risks if monsoon deficits persist into July–August.

4. Construction and Infrastructure

• Construction activity surged by almost 10%, making it one of the fastest-growing segments.
• Mega-projects under the National Infrastructure Pipeline (NIP) and PM Gati Shakti plan—covering highways, railways, airports, and renewable energy—added significant momentum.
• Affordable housing demand, supported by government incentives, fueled growth in cement, steel, and allied industries.
• Metro projects and urban infrastructure development in cities like Delhi, Mumbai, and Bengaluru also added to the expansion.

5. Trade, Hotels, and Transport

• This segment expanded by nearly 9%, reflecting rising urban consumption.
• Retail trade benefited from both e-commerce and brick-and-mortar expansion, especially in FMCG and consumer durables.
• Aviation and railways carried record passenger volumes, with airline traffic rising 15% year-on-year.
• Hospitality saw strong hotel occupancy rates across tourist hubs, indicating robust revival of domestic tourism.

6. Export and External Sector

• Export growth was mixed.
• Pharmaceuticals and engineering goods performed well, showing resilience against tariff shocks.
• IT exports cushioned the external sector, growing steadily in dollar terms.
• However, textiles and handicrafts struggled due to weaker demand from the US and EU.
• The trade deficit widened marginally, though remittance inflows and strong forex reserves kept stability intact.

Challenges Ahead

Despite the robust growth, the Indian economy faces persistent challenges:

• High food inflation may erode rural purchasing power.
• Job creation in manufacturing and services has not fully matched output growth.
• Global trade disruptions from tariff wars and geopolitical tensions could impact India’s exports.
• Monsoon dependency remains a vulnerability for the agriculture sector.

Government Outlook

The Finance Ministry projects 7%–7.3% growth for the year, banking on infrastructure push, manufacturing incentives (PLI schemes), and rising domestic consumption.
The Reserve Bank of India is expected to maintain a cautious monetary stance, balancing inflation concerns with growth needs.

Conclusion

The April–June quarter has reinforced India’s image as the growth engine of the global economy. With manufacturing, construction, and services showing exceptional performance, India looks well-positioned to sustain its upward momentum—provided inflation and external shocks are managed effectively.