India's Recovery Uneven as Primary, Secondary Sectors Lag

ECONOMY
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AuthorAnanya Iyer|Published at:
India's Recovery Uneven as Primary, Secondary Sectors Lag
Overview

National Statistics Office data reveals India's economic recovery post-Covid remains uneven. The primary and secondary sectors show declining growth, while the services sector, though posting higher numbers, is range-bound. Experts cite adverse weather, low farm prices, and structural constraints for the slowdown, despite an overall GDP growth forecast of 7.4% for FY26, heavily reliant on select service segments.

India's economic rebound from the Covid-19 shock is proving to be a lopsided affair. Official GDP data from the National Statistics Office (NSO) shows a continuous decline in growth for the vital primary and secondary sectors. While the services sector exhibits resilience, its expansion remains confined to a narrow band.

Primary Sector Weakness

Growth in the primary sector has decelerated significantly, falling to 2.7% in fiscal year 2025-26 from 4.4% in the prior year. Agriculture and allied activities are expected to grow by 3.1%, but mining and quarrying is projected to contract by 0.7%. Experts point to a confluence of factors, including adverse weather patterns, depressed farm prices, increased fertilizer costs, and persistent supply chain disruptions that are squeezing profit margins.

Professor of Finance Vinay K Srivastava notes that reduced sowing incentives and declining demand have further hampered momentum since the pandemic.

Services Sector Resilience, Limited Upside

The services sector remains the primary driver of economic expansion, with an estimated growth of 9.1% in real terms for 2025-26, mirroring last year's pace. However, this growth appears largely range-bound, indicating limited potential for acceleration. Financial, real estate, and professional services, alongside public administration, are projected to expand by 9.9%. In contrast, trade, hotels, transport, and communication services are forecast to grow at a slower 7.5%, highlighting uneven recovery dynamics within the sector.

Gaura Sen Gupta, Chief Economist at IDFC FIRST Bank, remains optimistic, attributing services sector growth primarily to domestic demand revival, especially in urban areas post-GST adjustments. The sustainability hinges on wage growth, which is showing early signs of pickup.

Secondary Sector's Mixed Performance

The secondary sector presents a mixed performance. Manufacturing and construction are each estimated to grow around 7%. However, growth in electricity, gas, and water supply has softened to 2.1%. This limits the secondary sector's capacity to counterbalance the weaknesses seen in agriculture and mining.

Overall Economic Outlook

Overall GDP growth is forecast at 7.4% for 2025-26, an increase from the 6.5% recorded in 2024-25. Yet, the sectoral breakdown underscores an increasing reliance on select service segments. The lagging primary sector and the range-bound nature of broader services growth pose challenges to sustained, broad-based economic expansion.

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