India's economy grows at 7.7 pc in FY26, but slower numbers loom ahead

India's GDP — gross domestic product, the broadest measure of the size of an economy — grew at 7.7% in 2025-26, up from 7.1% the previous year, according to provisional estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday (June 5).

The numbers paint a picture of a resilient economy gathering momentum, but the broader trends suggest the road ahead may be bumpier.

In simple terms, the country produced significantly more goods and services this year than last. The final quarter of the financial year (January to March 2026) was particularly strong, with the economy expanding 7.8% compared to the same period a year ago.

GVA numbers

A closely watched companion measure called Gross Value Added, or GVA — which captures what different sectors of the economy actually produce, before taxes are added in — grew at 7.9% for the full year, slightly ahead of overall GDP growth. In money terms, it crossed ₹294 lakh crore.

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The secondary sector, which includes manufacturing and construction, grew 8.8%, while the tertiary sector — services of all kinds — expanded at an even faster 9.3%.

The primary sector, covering farming, forestry and mining, grew at a more modest 3.2%.

Sectoral trends

The GDP growth was driven mainly by two broad parts of the economy. Manufacturing — which includes factories making everything from cars to medicines — grew by a robust 10.7% for the full year. Services, which cover banking, trade, hotels, transport and IT, also had a strong showing, growing at 9.3%.

Agriculture grew more modestly at 3%, driven largely by the performance of farming and fishery. In nominal terms — the actual rupee value before adjusting for inflation — the economy crossed ₹346 lakh crore, up nearly 9% from last year.

On the spending side, both household consumption and business investment rose by more than 7.5%, suggesting that ordinary Indians are spending more and companies are putting money into new capacity.

RBI projections

However, the good news comes with an important caveat. Earlier today, the Reserve Bank of India dialled down its expectations for the coming year. Governor Sanjay Malhotra trimmed the central bank's growth forecast for FY27 to 6.6%, down from an earlier estimate of 6.9%, a signal that headwinds are building.

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Chief among them is the ongoing conflict in West Asia, which has pushed global crude oil prices to around $97 a barrel. Since India imports most of its oil, higher prices directly inflate the country's import bill and weaken the rupee, squeezing household budgets and corporate margins alike. Malhotra acknowledged that elevated energy costs remain a live threat to economic activity.

For now, the central bank is holding its stance, keeping options open rather than committing to either raising or cutting rates — a reflection of just how uncertain the view from here looks.