The Indian economy is expected to remain the fastest-growing major economy in the fiscal year 2026, driven by its sound macroeconomic fundamentals, robust financial sector, and commitment to sustainable growth. According to a report by the State Bank of India (SBI), the country’s domestic finances are sufficient to support the anticipated growth, and demand-induced pressure on prices is not expected in the upcoming fiscal year. The report’s author, Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, noted that the only downside to growth comes from external and geopolitical factors.
India’s economy grew by 7.4% in the fourth quarter of the fiscal year 2025, with a strong uptick in capital formation, which registered a 9.4% annual growth. The recovery in capital formation was driven by a revival in the core sector, as evident from high-frequency indicators. The overall growth in capital formation for the fiscal year 2025 stands at 7.1%. The annual growth rate for the fiscal year 2025 is estimated at 6.5%.
All sectors exhibited better growth numbers in the fourth quarter, with the industry growing by 6.5%, and the services sector growing by 7.3%. The construction sector saw a significant growth of 10.8%, while the manufacturing sector increased by 4.8%. Private consumption maintained its healthy run, registering a growth of 7.2% for the fiscal year 2025. Export demand was also healthy, with a growth of 6.3%, while imports contracted by 3.7% for the whole year.
The SBI report notes that this growth was front-loaded due to an export push amidst US tariffs uncertainty. The highest contraction in imports occurred in the fourth quarter, at 12.7%, which pulled the overall GDP growth to 7.2% in the quarter. Despite this, the report is optimistic about India’s economic prospects, citing its sound macroeconomic fundamentals and commitment to sustainable growth. With higher anticipated savings, the domestic finances are expected to be sufficient to finance the anticipated growth, and the economy is poised to remain the fastest-growing major economy in the fiscal year 2026.