India’s economy demonstrated significant momentum, achieving a 7.7 per cent growth rate in the fiscal year 2025-26, driven by a strong 7.8 per cent expansion in the January-March quarter, according to government data.
Photograph: Rupak De Chowdhuri/Reuters
Key Points
- India’s GDP expanded by 7.8 per cent in the January-March quarter, exceeding forecasts driven by strong domestic demand and government expenditure.
- Full-year GDP growth for FY26 accelerated to 7.7 per cent, up from 7.1 per cent in FY25, supported by healthy consumption and robust investment.
- The Reserve Bank of India has revised its FY27 GDP growth forecast downwards to 6.6 per cent due to elevated energy prices and supply-chain disruptions from the West Asia conflict.
- Chief Economic Adviser V Anantha Nageswaran expressed optimism for India to return to over 7 per cent growth in FY28 if external conditions improve.
- Gross Value Added (GVA) grew by 7.9 per cent in the January-March quarter, indicating strong production momentum across services, manufacturing, and construction.
India’s economy expanded 7.8 per cent in the January-March quarter, exceeding forecasts on strong domestic demand and government expenditure, before rising oil prices and supply-chain disruptions began clouding the outlook.
The GDP growth compared with 7 per cent expansion a year back and 8 per cent in the previous quarter. Full-year growth accelerated to 7.7 per cent from 7.1 per cent in FY25, supported by healthy consumption and robust investment activity.
Impact of Global Events on Economic Outlook
The January-March period accounted for just one month of disruptions caused by the war in Iran.
The spike in oil prices and the disruption in supplies from the Middle East — a key source for India’s crude oil, natural gas and LPG — will be fully visible in the current April-June quarter.
The Reserve Bank of India has already cut its 2026-27 (FY27) GDP growth forecast to 6.6 per cent from 6.9 per cent, citing elevated energy and commodity prices and persistent supply-chain disruptions linked to the conflict in West Asia.
Chief Economic Adviser V Anantha Nageswaran said India could return to a growth rate of more than 7 per cent in FY28 if external conditions improve.
He said even if growth slows below 7 per cent in FY27, as projected by the RBI, policy measures aimed at preserving macroeconomic stability and ensuring adequate supplies could help the economy return to a growth trajectory above 7 per cent in FY28, provided external conditions improve.
Underlying Economic Activity and Sectoral Performance
Gross value added, which strips out the volatile components such as indirect taxes and government subsidies to present a more accurate measure ​of underlying economic activity, grew 7.9 per cent during the January-March quarter, the data released by MoSPI showed.
“The fact that GVA growth at 7.9 per cent outpaced GDP growth suggests that India’s expansion was not solely demand-driven but also backed by strong production momentum,” said Rumki Majumdar, economist at Deloitte India.
Firm performance across services, manufacturing and construction indicates that the economy has entered a period of global uncertainty from a position of strength, which should help it better absorb potential supply-side shocks, she said.
“We remain cautiously optimistic that tensions in the Middle East will ease over the coming months and that supply-chain disruptions will gradually subside by the end of the year,” she said.
“Real GDP or GDP at constant prices is estimated to attain a level of Rs 323.12 lakh crore in the 2025-26, against the First Revised Estimate (FRE) of GDP for the year 2024-25 of Rs 299.89 lakh crore,” according to the data released by National Statistic Office (NSO).
The nominal GDP or GDP at current prices is estimated to attain a level of Rs 346.36 lakh crore in 2025-26, against Rs 318.07 lakh crore in 2024-25, showing a growth rate of 8.9 per cent.
This is the second set of GDP data in the new series with 2022-23 as the base year.
Government’s Commitment and Future Outlook
Commenting on the data, Finance Minister Nirmala Sitharaman said the government led by Prime Minister Narendra Modi is committed to further drive the “reform express” with decisive policy measures to ensure positive economic momentum amidst the global challenges.
NSO further said GDP at constant prices in January-March quarter of 2025-26 is estimated at Rs 87.77 lakh crore, against Rs 81.40 lakh crore in the year-ago period, a growth of 7.8 per cent.
Addressing a press conference after release of the data, Chief Economic Advisor V Anantha Nageswaran said the GDP data reflects a balanced picture with respect to different components of economy.
He also said India will return to 7 per cent growth rate in the next fiscal year on the back of policy measures.
“We have no reason to second guess them (RBI forecast) at this point, because there are both possibilities on the upside and on the downside with respect to the numbers that they have presented,” he said here.
“So, even if the growth were to slip below 7 per cent as the RBI forecast suggests… macro stability measures and supply assurances will bring us back to a 7 per cent plus growth track in FY28 or as soon as external conditions improve,” Nageswaran said.
NSO said secondary and tertiary sectors have boosted the performance of the economy by registering growths of 8.8 per cent and 9.3 per cent, respectively, during FY26.
These sectors include construction, manufacturing, ‘trade, hotels, transport, communication and services related to broadcasting, storage’, and ‘financial, real estate, IT, professional services and ownership of dwelling’.
The primary sector registered 3.2 per cent growth rate mainly driven by the performance of agriculture and fishery sectors.
“Agriculture, livestock, forestry and fishing” segment grew at 3.6 per cent in the fourth quarter compared to 4.6 per cent. During 2025-26, the growth was 3.1 per cent.
On the expenditure side, both private final consumption expenditure (PFCE) and gross fixed capital formation (GFCF) registered over 7.5 per cent expansion during 2025-26.
The gross value added (GVA) has been estimated at Rs 294.91 lakh crore in 2025-26, against Rs 273.36 lakh crore in 2024-25, registering a growth rate of 7.9 per cent as against 7.3 per cent in the preceding year.
The GVA in the fourth quarter of FY26 was Rs 80.18 lakh crore against Rs 74.32 lakh crore in the year-ago period, registering a growth of 7.9 per cent.
