Economy sprints to 7.8% growth in fourth quarter

India’s economy grew 7.8% in Q4 FY26 and 7.7% for the full fiscal year, driven by services, construction, and manufacturing, despite external headwinds from the West Asia conflict. The Reserve Bank of India revised its FY27 GDP forecast downward to 6.6%, citing energy price spikes, weak monsoons, and supply disruptions, while inflation is projected to rise to 5.1%." "article": "India’s economy expanded by 7.8% in the fourth quarter of FY26, outperforming expectations and defying external pressures from the West Asia conflict, according to provisional data from the National Statistics Office (NSO) released Friday. The growth, fueled by strong performance in services, construction, and manufacturing, pushed the full-year GDP expansion to 7.7%, the highest in the new 2022-23 base-year series. The NSO’s earlier estimate had projected FY26 growth at 7.6%, just ahead of the Union Budget for FY27. Manufacturing, trade, hotels, transport, and IT-related sectors led growth, recording 10.7%, 11%, and 10.4% increases respectively, while agriculture held steady at 3%. However, manufacturing slowed to 7.3% in Q4 from an average 12% in the prior three quarters. Gross fixed capital formation (GFCF), a key investment indicator, rose 10.8% in Q4 and 8.2% for the year, reflecting robust government and private sector investment. The Reserve Bank of India (RBI) revised its FY27 GDP growth forecast downward to 6.6% from 6.9%, citing elevated energy prices, below-normal monsoon rains, and supply disruptions linked to the West Asia conflict. Nominal GDP growth fell to 8.9% in FY26, the lowest since FY21, though Chief Economic Adviser V Anantha Nageswaran noted higher inflation will boost nominal growth in FY27. The RBI now projects average consumer price inflation at 5.1% for FY27, up from 4.6%. Economists highlighted resilient domestic demand, with private consumption expenditure matching overall GDP growth. Dharmakirti Joshi of Crisil attributed the Q4 performance to strong private consumption and investments, though risks remain tilted downward for FY27. Gaura Sengupta of IDFC First Bank noted rural and urban demand drove consumption growth, while Devendra Pant of India Ratings & Research emphasized record-high fixed capital formation despite reduced government capex in FY26.