India’s Economy Grows 7.8% in Q4 FY26, Beating RBI and Market Expectations

India’s Q4 FY26 has showed the robust growth of 7.8% in the January–March quarter and it had outperformed the expectations and the Reserve Bank of India’s projections. According to the provisional national accounts data released by the National Statistical Office (NSO), India’s full year economic growth has been revised the upward to 7.7%. The strong investment activity, services sector expansion and improved agricultural output played the crucial role to sustaining the growth despite geopolitical tensions in the West Asia and global economic uncertainties.

India’s Economy Records Strong Growth in the Q4 FY26

India’s Gross Domestic Product (GDP) touched the 7.8% during the fourth quarter of FY26 and significantly exceeding the forecasts by economists and policymakers.

The growth rate surpassed the,

• RBI projection: 7.0%
• Reuters estimate: 7.2%
• Bloomberg estimate: 7.2%

The strong performance indicates that the ongoing West Asia crisis had just a limited impact on the India’s economic activity during the last quarter.

Honorable Prime Minister Narendra Modi described the growth as the reflection of India’s economic resilience, successful structural reforms and the efforts of 1.4 billion citizens.

FY26 GDP Growth Revised Upward to 7.7%

The National Statistical Office (NSO) has revised that the India’s full-year GDP growth estimate for the FY26 from 7.6% to 7.7%.

This upward revision highlights the stronger-than-expected performance across the multiple sectors of the economy.

Key GDP Numbers

Indicator	Growth Rate
Q4 FY26 GDP Growth	7.8%
FY26 Overall GDP Growth	7.7%
Nominal GDP Growth	8.9%
Economy Size	₹346.4 Trillion
Fiscal Deficit	4.4% of GDP

The higher nominal GDP also helped the government to maintain the fiscal discipline during the financial year.

Services Sector Emerges as the Growth Engine

India’s services sector has remained as the biggest contributor to robust economic growth.

With the trade, hotels, transport, communication and related services has recorded the impressive growth of 12.5% which is the fastest pace in the last 12 quarters.

Meanwhile the financial, real estate and professional services expanded by 10.4% for the third consecutive quarter.

Major Growth Contributors

• Trade, Hotels & Transport: 12.5%
• Financial & Real Estate Services: 10.4%
• Construction: 8.4%
• Manufacturing: 7.3%
• Agriculture: 3.6%
• Mining: 5.4%
• Electricity: 4.1%

These sectors collectively helped to maintain the India’s strong growth momentum.

Investment Drives The Economic Expansion

A main highlight of the quarter was the sharp increase in to the investment activity.

Gross Fixed Capital Formation (GFCF) which is a measure of investment in the economy grew by 10.8%.

This marks the first double-digit investment growth in at least 12 quarters and it indicates the growing business confidence.

Also the private consumption also remained healthy at 7.1% although it moderated slightly as compared to the previous quarters.

Demand-Side Growth Drivers

• Gross Fixed Capital Formation: 10.8%
• Private Final Consumption Expenditure: 7.1%
• Government Final Consumption Expenditure: 4.9%

The data suggests that the both investment and consumption contributed significantly to the economic growth.

Agriculture and Construction Show Improvement

The agriculture sector has recorded the growth of the 3.6% during the March quarter which is supported by the strong rabi harvest.

Construction activity also remained the robust and it expanding by 8.4%, and reflecting the continued infrastructure development and housing demand.

Mining and electricity sectors has also showed the improved performance compared to the previous quarter and indicating the broad-based economic recovery.

These developments highlight the resilience of the both rural and urban economic activity.

Moderate Manufacturing Growth

While the manufacturing sector continued to grow this sector has witnessed some moderation.

Manufacturing output also increased by the 7.3% and it returning to single digit growth after recording the double-digit expansion for five consecutive quarters.

Despite the slowdown manufacturing remains as one of the key pillars which supporting the India’s economic growth and employment generation.

Analysts believes that the global demand conditions and supply chain uncertainties may have contributed to the moderation.

Government’s Response and Outlook

Respectable Finance Minister Nirmala Sitharaman has reiterated the government’s commitment to continuing the economic reforms and maintaining growth momentum.

The government aims to,

• Improve the Ease of Doing Business
• Enhance Ease of Living
• Encourage investment
• Generate employment opportunities
• Strengthen economic resilience

Policymakers also remain focused on to the balancing growth with inflation management amid global uncertainties.