Date: Mon, 08 Jun 2026 00:30:19 +0000
Extracted Body:
The Indian economy grew at a healthy pace in the fourth quarter (January-March) of the last financial year (2025-26), despite the conflict in West Asia that had begun to cause widespread disruptions to global energy markets and trade towards the end of the quarter. GDP growth has been pegged at 7.8 per cent for the quarter by the National Statistics Office, driven by a buoyant services sector. This takes growth for the full year to 7.7 per cent — the highest in the last three years. However, at 8.9 per cent, nominal growth was the lowest. It was also significantly lower than the 10.1 per cent assumed in the Union budget.
The disaggregated data shows that the services sector grew at almost 10 per cent in the fourth quarter, with both segments — trade, hotels, transport, and communication and financial, real estate, IT and professional services — growing at a fairly healthy clip. Agriculture continued to hold up, while manufacturing growth slowed down. On the other hand, both private consumption and investment stayed steady. Growth over the full year — a period marked by tremendous uncertainty on the external front owing to Donald Trump’s tariff policies — is likely to have been supported by both fiscal and monetary policy. Measures such as the rationalisation of GST rates and low interest rates would have provided support to economic activities.
The outlook for the ongoing financial year (2026-27) is, however, less buoyant. In the June Monetary Policy Committee meeting, the RBI has projected the economy to slow down to 6.6 per cent this year, down from its earlier assessment of 6.9 per cent. This implies that growth this year is likely to be around 1.1 percentage points lower than last year. Some estimates are more pessimistic. Higher energy and commodity prices and continued supply chain disruptions, along with the possibility of a weak monsoon season, are heavily weighing down expectations. Economic momentum is expected to be particularly hit during the first half of the year. Growth is expected to slow down, while inflation is likely to edge upwards. Much will depend on how long the conflict in West Asia drags on. Then there is the stress on the balance of payments and the currency to contend with. On their part, the Union government and the RBI have taken several steps to shield the economy during this period of stress. Last week, measures were announced to attract foreign capital and ease the pressure on the rupee. But, considering the severity of the situation, more steps may be needed.