India's FY26 GDP growth hits 7.7%, Q4 expansion at 7.8% surprises on the upside: SBI Research

India's economy delivered a stronger-than-expected performance in the fourth quarter of FY26, with GDP growth accelerating to 7.8%, helping annual growth for FY26 rise to 7.7%, according to an SBI Research Ecowrap report. The growth momentum was supported by robust services activity, strong industrial performance, rising private investment, and improving consumption trends.

The report described the Q4 performance as a "pleasant surprise," noting that India's economy has shown resilience despite global uncertainties and geopolitical tensions. Gross Value Added (GVA), a key measure of economic activity, grew by 7.9% in Q4 FY26 and also averaged 7.9% for the full fiscal year, while Core GVA expanded by a strong 9.7%.

The services sector remained the primary growth engine, expanding 9.9% in Q4 FY26. Within services, the category comprising trade, hotels, transport, communication and broadcasting services recorded a sharp 12.5% growth, while financial, real estate and professional services grew 10.4%.

Industrial activity

Industrial activity also remained robust. Industry grew 7.3% in the March quarter, led by 8.4% growth in construction and 7.3% growth in manufacturing. Manufacturing growth for the full year stood at 10.7%, reflecting continued strength in value-added production.

Investment announcements

SBI Research highlighted a significant improvement in investment activity. Private investment announcements rose to ₹56 lakh crore in FY26, up from ₹37 lakh crore in FY25, while total investment announcements touched a record ₹80 lakh crore. The manufacturing sector accounted for nearly 29% of new investment proposals, followed closely by the power sector.

Consumption indicators also improved. Private final consumption expenditure growth recovered to 7.7% in FY26, while gross fixed capital formation increased 8.2%, the highest level recorded under the new GDP series.

GDP methodology

According to SBI Research, the revised GDP methodology is also providing a better picture of India's informal economy. Around 7.9 crore enterprises registered under ASUSE contribute nearly 12% of overall GVA, with formalisation, digitisation and improved credit access helping boost productivity and growth.

Looking ahead, the report remains optimistic about India's growth prospects. High-frequency indicators for April and May suggest above-average economic acceleration, raising the possibility that Q1 FY27 growth could exceed the RBI's forecast of 6.6%. SBI Research believes India will continue to be the world's fastest-growing major economy in FY27, supported by strong macroeconomic fundamentals, a resilient financial sector and sustained investment momentum.

The report also projected that nominal GDP growth could rise to 12.5%-13% in FY27, higher than the Budget estimate of 10%, if inflation and GDP deflator trends remain elevated.