India Manufacturing Hits 10.7% Annual Growth in FY26, Led by Services Super-Cycle at 9.9%

India's FY26 Sectoral Breakout: Manufacturing at 10.7%, Services at 9.9% — A Structural Story

The headline 7.7% GDP growth figure for India's FY2025-26 masks an even more impressive story at the sectoral level. Drill into the MoSPI data released June 5, 2026, and what emerges is a picture of genuinely broad-based, structurally grounded expansion — not the patchy, services-only growth that critics have sometimes levelled at India's GDP trajectory.

Manufacturing: 10.7% Full-Year Growth

India's manufacturing sector grew 10.7% for the full fiscal year FY26 — its strongest performance in years. Q4 FY26 manufacturing growth stood at 7.3%. This acceleration reflects several converging forces:

• PLI (Production Linked Incentive) Schemes: Government-backed incentive programs across sectors including electronics, pharmaceuticals, textiles, auto components, and semiconductors have attracted major domestic and foreign capital investment, gradually building India's manufacturing base.
• China+1 Strategy: Global supply chain diversification — with companies seeking alternatives to China-dependency — has continued to drive investment in Indian manufacturing capacity.
• Wage Competitiveness: India's labour cost advantage over peers is attracting labour-intensive manufacturing in garments, footwear, and electronics assembly.

Services: 9.9% Q4 Growth Led by Trade and Finance

Services — traditionally India's economic engine — delivered 9.9% growth in Q4 FY26, with notable sector-level breakdowns:

The 12.5% growth in the trade/transport/communication cluster is particularly significant — it reflects a post-Iran-war surge in domestic transport and logistics activity as supply chains adjusted to the global shipping disruption.

Construction: 8.4% in Q4

Construction growth at 8.4% in Q4 FY26 confirms that India's infrastructure push — spanning roads, highways, ports, airports, and urban housing — is delivering meaningful economic multiplier effects.

Core GVA: 9.7% for Full Year

Core GVA growth of 9.7% for the full fiscal year (stripping out agriculture and government subsidies to focus on private sector economic activity) is among the highest in India's recent economic history, suggesting that the growth is genuinely led by private sector dynamism rather than government spending.

Conclusion

India's FY26 sectoral data tells the story of an economy in structural acceleration. The question for FY27 is whether the momentum can be sustained in the face of higher energy costs, FPI outflows, and a more challenging global rate environment — challenges the RBI is already incorporating into its downgraded 6.6% growth forecast.