GDP rose 7.7% in FY26, 7.8% in Q4; RBI trims this year's projection to 6.6%

NEW DELHI: The Indian economy grew 7.8% in the Jan-March quarter as strong investment, sustained farm production and expansion of the construction and tertiary sector led to a robust demand, offsetting the anticipated adverse impact of the conflict in West Asia.

Data released by the National Statistics Office (NSO) Friday with the revised 2022-23 base year estimated 2025-26 growth at 7.7%, compared with 7.6% in the second advance estimates released in Feb. This is comparably higher than the 7.1% growth recorded in financial year 2024-25.

The economy had grown at 8% in the Dec quarter, and 7% during Jan-March 2025.

"Our government led by PM Narendra Modi is committed to further drive the 'Reform Express' with decisive policy measures to ensure positive economic momentum amidst the global challenges," FM Nirmala Sitharaman said in a social media post.

Earlier Friday, the RBI lowered its GDP forecast for FY27 to 6.6% from the 6.9% estimated in April, citing elevated energy and other commodity prices, as well as continued supply disruptions arising from the conflict in West Asia, which are likely to weigh on economic activity. It also lifted retail inflation forecast for 2025-26 to 5.1% from 4.6%.

Manufacturing sector Q4 growth moderates to 7.3%
FM Nirmala Sitharaman said in a social media post,“Our govt led by PM Narendra Modi is committed to further drive the ‘Reform Express’ with decisive policy measures to ensure positive economic momentum amidst the global challenges.”

Data showed that gross value added (GVA), which strips out the volatile components such as indirect taxes and govt subsidies, grew 7.9% during Q4 as compared to 7.1% in the corresponding quarter of 2024-25. Among the tertiary sector — trade, repair, hotels, transport and communication (12.5%) along with financial, real estate & professional services (10.4%) clocked double-digit growth, the data showed. Growth in the manufacturing sector (7.3%), however, moderated during the quarter from 11.8% in Q4 of 2024-25. Output in the farm sector sustained at 3.6%.

On the expenditure side, gross fixed capital formation (GFCF), which represents the level of investment activity in the economy, grew a robust 10.8% in Q4 2025-26 from 6.2% in Q4 2024-25. Similarly, private final consumption expenditure (PFCE) grew a robust 7.1% as compared to 5.6% in the previous year.

CEA V Anantha Nageswaran said that with upward momentum of retail inflation, nominal GDP growth in FY27 is expected to cross budget estimates. “Nominal GDP growth will be higher than the number which the budget estimates used,” he said. He further added that even if growth were to slip below 7% in this financial year as the RBI forecast suggests, “macro stability measures and supply assurances will bring us back to a 7% plus growth track in FY28 or as soon as external conditions improve”.