India’s FY26 GDP At 7.70%; Domestic Demand Offsets External Weakness

India’s economy grew 7.70 per cent in the financial year 2005-26, delivering a stronger-than-expected performance and beating estimates of a slowdown amid global uncertainties. However, concerns over the potential impact of the ongoing US-Iran conflict, rising crude oil prices, and weakening global trade continue to cloud the economy’s growth in the current financial year.

According to official figures, the economy grew by 7.80 per cent in the March quarter of FY26, exceeding most forecasts and marginally beating the government’s earlier full-year growth estimate of 7.60 per cent. The strong quarterly performance came despite geopolitical tensions in West Asia and concerns over higher US tariffs affecting global demand.

The growth was largely driven by robust domestic demand, healthy investment activity, and strong performances in manufacturing and services. Manufacturing grew by 10.70 per cent, while trade, transport and related services expanded 11 per cent. Financial and real estate services also remained key contributors. 

On the demand side, private consumption rose 7.70 per cent, while investment, measured through gross fixed capital formation, increased 8.20 per cent. Continued government spending on infrastructure, a recovery in rural demand, and sustained activity in the services sector, helped pick up the pace in economic growth despite external volatility. 

Prime Minister Narendra Modi has also described the growth outcome as a result of economic reforms and the efforts of India’s 1.40 billion citizens. However, rising geopolitical tensions in West Asia remains a major concern for the pace of growth to continue in the current year. The US-Iran conflict has pushed up global crude oil prices, posing risks for an oil-importing nation like India. Higher energy costs could fuel inflation, increase import bills, weaken consumer spending, and put pressure on corporate margins.

The Reserve Bank of India (RBI) has already projected gross domestic product (GDP) growth to 6.60 per cent in FY27, citing uncertainties related to oil prices, global trade conditions, and geopolitical developments. Several brokerages have also lowered their outlooks, with some expecting growth in the range of 6.50-6.70 per cent during the current fiscal year.

Analysts have said that while India’s domestic demand remains relatively strong, sustaining growth will require continued investment, stable inflation, healthy rural incomes, and a recovery in exports. Much will also depend on how quickly global energy markets stabilise and whether geopolitical tensions ease in the coming months.