India's economy demonstrated exceptional resilience, ending the 2026 fiscal year with a robust 7.7% GDP growth. This performance was significantly boosted by a stronger-than-expected 7.8% expansion in the fourth quarter (January-March), as highlighted in a recent SBI Research Ecowrap report.
The report characterized the Q4 performance as a "pleasant surprise," underscoring India's ability to maintain economic momentum despite global uncertainties and geopolitical tensions. Key factors contributing to this growth included vigorous services activity, strong industrial output, increasing private investment, and favorable consumption trends.
Strong Economic Performance Across Sectors
Gross Value Added (GVA), a critical indicator of economic activity, grew by 7.9% in Q4 FY26, mirroring the average GVA growth for the entire fiscal year. Core GVA, excluding volatile components, expanded impressively by 9.7%.
The services sector remained a primary engine of growth, expanding by 9.9% in the March quarter. Within this sector, categories such as trade, hotels, transport, communication, and broadcasting services recorded a sharp 12.5% growth. Financial, real estate, and professional services also showed strong performance, growing by 10.4%.
Industrial Momentum and Investment Surge
Industrial activity also contributed significantly to the overall economic strength. The industrial sector grew by 7.3% in Q4, driven by an 8.4% expansion in construction and a 7.3% increase in manufacturing. For the full fiscal year, manufacturing growth reached 10.7%, reflecting sustained strength in value-added production.
SBI Research noted a substantial improvement in investment. Private investment announcements surged to ₹56 lakh crore in FY26, a significant increase from ₹37 lakh crore in FY25. Total investment announcements reached a record ₹80 lakh crore. The manufacturing sector accounted for nearly 29% of these new investment proposals, closely followed by the power sector.
Consumption Recovery and Informal Economy Insights
Consumption indicators also showed positive trends. Private final consumption expenditure growth recovered to 7.7% in FY26, while gross fixed capital formation increased by 8.2%, marking the highest level recorded under the new GDP series.
The report also highlighted that India's revised GDP methodology is providing a more accurate picture of the informal economy. Approximately 7.9 crore enterprises registered under ASUSE contribute nearly 12% of the overall GVA, with formalization, digitization, and improved credit access bolstering their productivity and growth.
Optimistic Outlook for FY27
Looking ahead, SBI Research maintains an optimistic view of India's growth prospects. High-frequency indicators for April and May suggest continued economic acceleration, potentially pushing Q1 FY27 growth beyond the Reserve Bank of India's (RBI) forecast of 6.6%.
The report projects that India will remain the world's fastest-growing major economy in FY27, supported by robust macroeconomic fundamentals, a resilient financial sector, and sustained investment momentum. Furthermore, nominal GDP growth could rise to 12.5%-13% in FY27, exceeding the Budget estimate of 10%, particularly if inflation and GDP deflator trends remain elevated.