India defies West Asia war concerns as Q4 GDP growth hits 7.8%; risks remain ahead

New Delhi: India’s financial system grew by a better-than-expected 7.8% within the March quarter from a 12 months earlier, belying fears of the West Asia war hurting the financial system, lifting FY26 growth to 7.7%, in keeping with official knowledge launched on Friday. A powerful exhibiting by personal funding and consumption backed the numbers.

“GDP growth shocked on the upside for Q4, led by stronger-than-expected growth in consumption, investments and valuables (gold impact),” mentioned Sakshi Gupta, principal economist at HDFC Financial institution. An ET Ballot had forecast 7.3% growth for the quarter. Gross home product (GDP) expanded 8%-revised upward from 7.8% within the newest knowledge release-in the December quarter and seven% within the year-ago March quarter. The financial system grew 7.1% in FY25.

To make sure, economists count on the influence of the war to start out exhibiting up in financial knowledge over the approaching months. Finance minister Nirmala Sitharaman mentioned the federal government is dedicated to energy ahead with its Reform Specific, implementing decisive coverage measures to make sure constructive financial momentum amid international challenges.

Up to date Estimates Doubtless by August
That is the second quarterly GDP launch below the revised collection that has a brand new base 12 months and broader protection. GDP collection will incorporate the brand new Index of Industrial Manufacturing collection and Producer Worth Index with base 12 months 2022-23, and launch the up to date estimates by August. Nominal GDP—a measure of the financial system at present costs, with out adjusting for inflation—grew 9.1% within the fourth quarter and eight.9% in FY26.

The numbers recommend that the financial system didn’t see materials influence of the West Asia battle within the quarter, mentioned ICRA chief economist Aditi Nayar. The war started on February 28.

Gross mounted capital formation, a measure of funding exercise, rose 10.8% within the fourth quarter from a 12 months earlier, the very best in three years below the brand new FY23 base 12 months collection. Non-public consumption grew 7.1% in contrast with 8.2% within the quarter earlier than, whereas authorities spending rose 4.9%, up from 4.6%.“The rise in investments stands out, significantly as authorities spending had moderated in Q4 FY26, signalling that growth in personal investments was possible the important thing driver,” mentioned Gupta.

Agriculture accelerated to three.6% from 1.7% within the previous quarter, whereas manufacturing growth moderated to 7.3% from 12.8%. Providers sector grew 9.9% in Q4 from a 12 months earlier, in contrast with 9.9% in Q3 The development sector recorded a excessive growth 8.4% in contrast with 6.7% within the quarter earlier than.

OUTLOOK
The war is prone to influence the financial system going ahead as greater power and different enter costs and provide disruptions dent exercise and demand.

The Reserve Financial institution of India on Friday revised its FY27 growth forecast downward to six.6% from 6.9% projected in April. The anticipated subpar monsoon will even possible drag down growth.

Devendra Kumar Pant, chief economist at India Rankings and Analysis (Ind-Ra), cautioned that the continued battle and weaker rainfall linked to El Nino situations may have an effect on growth prospects. Ind-Ra tasks FY27 growth at 6.7%, whereas ICRA expects sub-6.5%.

Gupta mentioned that growth is anticipated to average within the first quarter of FY27, as elevated power prices and their influence on margins weigh on growth. Nevertheless, upbeat export growth together with family consumption is anticipated to offer assist in Q1, she mentioned.

Chief financial advisor V Anantha Nageswaran mentioned that macro stability measures and provide assurances can deliver India again to a 7% growth trajectory in FY28, as quickly as exterior situations enhance.