The Indian economy expanded by 7.8% in the January-March quarter of financial year 2025-26, driven by robust investment, sustained agricultural production, and growth in the construction and services sectors. This performance mitigated the anticipated adverse effects of the conflict in West Asia.
Revised Growth Estimates
Data released by the National Statistics Office (NSO) on Friday, incorporating the revised base year of 2022-23, placed the full-year growth for 2025-26 at 7.7%. This is higher than the 7.6% projected in the second advance estimates released in February and compares favorably with the 7.1% growth recorded in 2024-25. The economy had grown by 8% in the December quarter and 7% in the same period a year ago.
Government and RBI Responses
Finance Minister Nirmala Sitharaman stated on social media, "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." Earlier on Friday, the Reserve Bank of India (RBI) lowered its GDP growth forecast for FY27 to 6.6%, down from 6.9% estimated in April, citing elevated energy and commodity prices and supply disruptions from the West Asia conflict. The RBI also raised its retail inflation forecast for 2025-26 to 5.1% from 4.6%.
Sectoral Performance
Gross Value Added (GVA), which excludes indirect taxes and subsidies, grew by 7.9% in Q4 compared to 7.1% in the same quarter of 2024-25. Within the services sector, trade, repair, hotels, transport, and communication grew by 12.5%, while financial, real estate, and professional services expanded by 10.4%. Manufacturing sector growth moderated to 7.3% in Q4 from 11.8% a year earlier. Agricultural output remained steady at 3.6%.
Expenditure Side Indicators
Gross Fixed Capital Formation (GFCF), a measure of investment, surged by 10.8% in Q4 2025-26 compared to 6.2% in Q4 2024-25. Private Final Consumption Expenditure (PFCE) grew by 7.1%, up from 5.6% in the previous year.
Outlook
Chief Economic Advisor V. Anantha Nageswaran noted that with upward momentum in retail inflation, nominal GDP growth in FY27 is expected to exceed budget estimates. He added that even if growth slips below 7% in the current fiscal year as per RBI forecasts, "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."
