India's economy likely expanded 7.4% year-on-year in the January-March quarter (Q4FY26), with Nirmal Bang projecting GDP growth at this level while maintaining their FY26 GDP estimate at 7.6%. The growth is expected to be driven by robust performance in services sector at 9.6% YoY in Q4 FY26, up from 9.1% in Q3 FY26 and 7% a year ago, as reported by NDTV Profit. Agriculture and allied sector growth is projected to be healthy at 4.5% YoY in Q4 FY26, supported by a robust Rabi crop. However, industry growth is seen moderating to 4.7% YoY in Q4 FY26 from 11.1% in Q3 FY26. The wedge between GVA and GDP growth is attributed to muted increase in net indirect tax collections, partly due to the reduction in GST and higher subsidies in Q4 FY26.
The Reserve Bank of India (RBI) has projected India's real GDP growth at 6.9% for 2026-27, maintaining an optimistic outlook despite rising geopolitical tensions and inflationary risks. In its Annual Report 2025-26, the central bank noted that "against the backdrop of a moderate global growth, the outlook for the Indian economy in 2026-27 remains positive, supported by strong macroeconomic fundamentals, although a prolonged West Asia conflict may pose downside risk." The RBI highlighted India's strong domestic demand conditions, healthy banking sector and sustained government capital expenditure as key growth drivers. India remained the fastest-growing major economy during 2025-26, with GDP growth estimated at 7.6% against 7.1% in the previous year, supported by strong domestic consumption, sustained investment, proactive policy initiatives and sound macroeconomic fundamentals.
Rajeev Agrawal from DoorDarshi India Fund believes India's domestic economy is relatively well-positioned to weather global market turbulence. According to reports from The Economic Times, Agrawal noted that uncertainty has become a defining feature of the global landscape, making it difficult for investors to predict how events will unfold. "Absolutely, the last few months every day we get some new news and so there is a lot of uncertainty. But the good news with uncertainty is that sometimes you have volatility which allows you to get good stocks at good prices," Agrawal explained. However, he emphasized that market volatility can create opportunities for long-term investors by allowing them to acquire quality businesses at attractive valuations. Agrawal believes even if diplomatic agreements are reached, uncertainty is unlikely to disappear due to a deep trust deficit between major global powers. "Even if there is a deal, I feel that if and when the deal goes through, even after that I am not certain that the deal will hold, how long it will hold, and maybe new developments will come. So, what I am predicting at this point is that even if there were to be a deal in the next few weeks, the uncertainty is likely to continue for a much longer period because there is a clear trust deficit between the two nations."
Agrawal's investment approach focuses on sectors less vulnerable to external disruptions, with domestic-oriented businesses as preferred areas. As reported by The Economic Times, he highlighted real estate as one of the strongest opportunities, noting that many property developers have reported robust pre-sales performance despite IT sector concerns. "Real estate continues to look reasonable. Banking and finance have also seen strong credit growth. And the third sector that I will say is renewable energy. Clearly, if this war is telling us anything, it is clear that India has to take on more areas of becoming energy independent." Banking and financial services remain appealing due to strong credit growth and healthy balance sheets across households and businesses, with continued economic expansion expected to sustain loan demand. Additionally, renewable energy has become increasingly important as geopolitical developments reinforce the need for energy independence, with Agrawal noting that "the key thing that we are doing is trying to look in areas which are not going to be as impacted from a business perspective or from an economy perspective."
The RBI has projected Consumer Price Index (CPI) inflation at 4.6% in 2026-27, compared to 2.1% in 2025-26, as inflationary pressures could intensify due to elevated crude oil prices, supply disruptions and global uncertainty. The central bank noted that "inflation in 2026-27 is likely to remain aligned with the target… however, the evolving upside risks to inflation may emanate from multiple other factors such as spike in global fuel and commodity prices amid geopolitical tensions." The RBI warned about possible spillovers to input and wage costs along with exchange-rate volatility. Despite the uncertain global environment, the report highlighted India's strong domestic demand conditions, healthy banking sector and sustained government capital expenditure as key growth drivers. The Monetary Policy Committee (MPC) had reduced the policy repo rate by 100 basis points during 2025-26 as inflation moderated sharply, but in April 2026, the MPC unanimously decided to keep the repo rate unchanged at 5.25% while retaining a "neutral" stance, citing the growth-inflation outlook remaining delicately poised amid heightened geopolitical risks.
The RBI underscored the Centre's continued consolidation efforts, with the gross fiscal deficit (GFD) for 2025-26 standing at 4.4% of GDP, below the government's medium-term target of 4.5%. For 2026-27, the Centre has projected fiscal deficit at 4.3% of GDP. "GFD is projected at 4.3% of GDP in 2026-27, reflecting the Centre's continued fiscal consolidation efforts in recent years," the report noted. Despite near-term challenges, Agrawal maintains that India's structural growth story remains intact. Strong domestic demand, healthy credit growth, an expanding renewable energy ecosystem, and supportive demographics continue to provide reasons for optimism. He noted that the rupee's depreciation has improved India's export competitiveness, potentially creating opportunities for exporters once global conditions stabilize. Looking ahead, economists expect growth to moderate in FY27 as external risks persist, with the conflict in West Asia posing risks primarily through higher crude oil prices and their impact on inflation, consumption, trade balances and business costs.
