“GDP growth surprised on the upside for Q4, led by stronger-than-expected growth in consumption, investments and valuables (gold effect),” said Sakshi Gupta, principal economist at HDFC Bank. An ET Poll had forecast 7.3% growth for the quarter. Gross domestic product (GDP) expanded 8%-revised upward from 7.8% in the latest data release-in the December quarter and 7% in the year-ago March quarter. The economy grew 7.1% in FY25.
To be sure, economists expect the impact of the war to start showing up in economic data over the coming months. Finance minister Nirmala Sitharaman said the government is committed to power ahead with its Reform Express, implementing decisive policy measures to ensure positive economic momentum amid global challenges.
Updated Estimates Likely by August
This is the second quarterly GDP release under the revised series that has a new base year and broader coverage. GDP series will incorporate the new Index of Industrial Production series and Producer Price Index with base year 2022-23, and release the updated estimates by August. Nominal GDP—a measure of the economy at current prices, without adjusting for inflation—grew 9.1% in the fourth quarter and 8.9% in FY26.
The numbers suggest that the economy did not see material impact of the West Asia conflict in the quarter, said ICRA chief economist Aditi Nayar. The war began on February 28.
Gross fixed capital formation, a measure of investment activity, rose 10.8% in the fourth quarter from a year earlier, the highest in three years under the new FY23 base year series. Private consumption grew 7.1% compared with 8.2% in the quarter before, while government spending rose 4.9%, up from 4.6%.“The rise in investments stands out, particularly as government spending had moderated in Q4 FY26, signalling that expansion in private investments was likely the key driver,” said Gupta.
Agriculture accelerated to 3.6% from 1.7% in the preceding quarter, while manufacturing growth moderated to 7.3% from 12.8%. Services sector grew 9.9% in Q4 from a year earlier, compared with 9.9% in Q3 The construction sector recorded a high growth 8.4% compared with 6.7% in the quarter before.
OUTLOOK
The war is likely to impact the economy going ahead as higher energy and other input prices and supply disruptions dent activity and demand.
The Reserve Bank of India on Friday revised its FY27 growth forecast downward to 6.6% from 6.9% projected in April. The expected subpar monsoon will also likely drag down growth.
Devendra Kumar Pant, chief economist at India Ratings and Research (Ind-Ra), cautioned that the ongoing conflict and weaker rainfall linked to El Nino conditions could affect growth prospects. Ind-Ra projects FY27 growth at 6.7%, while ICRA expects sub-6.5%.
Gupta said that growth is expected to moderate in the first quarter of FY27, as elevated energy costs and their impact on margins weigh on growth. However, upbeat export growth along with household consumption is expected to provide support in Q1, she said.
Chief economic advisor V Anantha Nageswaran said that macro stability measures and supply assurances can bring India back to a 7% growth trajectory in FY28, as soon as external conditions improve.
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