India’s economy ended FY26 on a stronger-than-expected note, with gross domestic product (GDP) expanding 7.8% year-on-year during the January–March quarter, driven by improved agricultural output and robust construction activity. The latest figures, released by the National Statistics Office (NSO), surpassed economists’ expectations of 7.2% growth.
The fourth-quarter performance, while slightly lower than the revised 8% growth recorded in the previous quarter, highlights the resilience of domestic demand despite growing external challenges. The government also revised the October–December quarter growth rate upward from 7.8% to 8%.
Gross Value Added (GVA), considered a more accurate indicator of underlying economic activity as it excludes indirect taxes and subsidies, grew 7.9% during the quarter. For the full fiscal year ended March 2026, India’s economy expanded by 7.7%, marginally higher than the government’s earlier estimate of 7.6%.
Sector-wise, construction emerged as a key growth driver, expanding 8.4% in the March quarter compared with 6.7% in the preceding quarter. Agricultural growth also improved significantly to 3.6%, up from 1.7%, providing support to rural incomes and employment. Manufacturing growth, however, slowed to 7.3% from a revised 12.8% in the previous quarter.
Despite the strong FY26 performance, concerns remain over the outlook for the current fiscal year. The ongoing conflict involving Iran and its impact on the Middle East has increased pressure on India, one of the world’s largest crude oil importers. Rising energy costs, a weakening rupee, and inflationary risks have prompted the Reserve Bank of India to adopt a more cautious stance.
The central bank recently projected economic growth to slow to 6.6% in FY27, citing geopolitical tensions and domestic risks. Additionally, India is facing the weakest monsoon in 11 years, raising concerns over agricultural output and rural consumption in the months ahead.
While external uncertainties continue to cloud the outlook, India’s strong FY26 growth underscores the economy’s ability to maintain momentum through domestic demand, infrastructure development, and improving farm-sector performance.
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