The provisional estimate is also marginally higher than the 7.6 percent that the ministry projected in the second advance estimates in February.Manufacturing and services emerged as the key drivers of growth amid global economic uncertainty, according to provisional Gross Domestic Product (GDP) estimates released Friday by the Ministry of Statistics and Programme Implementation (MoSPI).
The data showed that growth remained robust in the final quarter of the previous fiscal year, with GDP expanding 7.8 percent in the January-March period, indicating that domestic economic activity retained momentum despite concerns over global trade disruptions.
Among the key drivers for the growth was the manufacturing sector, which grew at 10.7 percent in real terms, followed by trade, hotels, transport and communication related services at 11 percent and financial, real estate and professional services at 10.4 percent.
Overall, the services sector grew by 9.3 percent, while the secondary sector, comprising manufacturing, construction and utilities grew by 8.8 percent. The primary sector which includes agriculture and allied activities, grew by just 3.2 percent.
On the demand side, Private Final Consumption Expenditure (PFCE)–a key measure of household spending–grew 7.7 percent in FY2025-26, up from 5.8 percent in the previous year. Gross Fixed Capital Formation (GFCF), a measure of investment activity, grew by 8.2 percent compared to 6.4 percent growth in FY2024-25.
Chief Economic Adviser (CEA) V. Anantha Nageswaran described FY2025-26 growth pattern as broad-based. “The gratifying thing is not only the pickup in services sector growth rate, but also more than double digit growth in the manufacturing sector in two out of the last three years,” he said.
The sharp rise in investment, Arya Roy Bardhan, junior fellow at the Observer Research Foundation (ORF), told ThePrint, was particularly encouraging as it “improves the quality of growth by reducing dependence on consumption alone and creating conditions for future productivity gains”.
However, he cautioned that weak agricultural growth could constrain rural incomes if it persists.
“The Q4 GDP growth of 7.4 percent is a welcome sign, suggesting that economic activity strengthened towards the end of the fiscal year despite an uncertain global backdrop,” Aashi Gupta, associate fellow at the Centre for Social and Economic Progress (CSEP), told ThePrint. She attributed the acceleration largely to strong construction activity and continued resilience in services.
However, economists cautioned that sustaining the momentum will require stronger private-sector participation and broader gains in employment and incomes.
“The challenge going forward is less about achieving high headline growth rates and more about ensuring that growth translates into stronger job creation, income gains and a more broad-based recovery in private demand,” Gupta said.
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Outlook for FY2026-27
The GDP data comes on a day when the Reserve Bank of India (RBI) left the repo rate unchanged at 5.25 percent. Citing the prolonged West Asia conflict and elevated energy prices, the central bank revised its inflation projection for FY2026-27 upward to 5.1 percent from 4.6 percent earlier.
The RBI also lowered its real GDP growth forecast for FY2026-27 to 6.6 percent from 6.9 percent, pointing to higher energy costs and moderation in domestic demand.
In a statement, RBI Governor Sanjay Malhotra said prices of key inputs, including commercial LPG, industrial raw materials, chemicals, base metals, rubber and plastic products, have increased which could exert upward pressure on inflation as firms pass on higher costs.
He further added that the global environment has deteriorated since the last policy meeting. “The adverse implications of the extended disruption in supply chains and elevated energy prices are reflected in the moderation of growth and increase in inflation projections from the April policy.”
According to Bardhan of ORF, prolonged geopolitical uncertainty is likely to put pressure on inflation, the current account and the rupee before materially affecting economic growth.
As for RBI’s projections for FY2026-27, Nageswaran said that the central bank’s projections offered a reasonable assessment of current risks. “We have no reason to second-guess them at this point because there are both possibilities on the upside and on the downside with respect to the numbers that they had presented us this morning.”
The CEA stressed that uncertainty around crude oil prices remains the biggest risk to both growth and inflation. At the same time, he pointed to encouraging signs in trade and domestic activity. “Most high frequency indicators suggest that domestic demand and overall economic activity have remained relatively resilient.”
(Edited by Tony Rai)
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