Indian Economy Set to Remain Fastest-Growing in FY26: SBI Report

New Delhi (IANS) – India is expected to retain its position as the world’s fastest-growing major economy in FY26, driven by strong macroeconomic fundamentals, a resilient financial sector, and a continued focus on sustainable development, according to a new report from the State Bank of India (SBI).

Citing the Reserve Bank of India's latest annual report, Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI, noted that higher domestic savings are expected to adequately support future growth, eliminating the risk of demand-driven inflationary pressure in FY26.

However, he warned that external and geopolitical factors could pose potential risks to this growth outlook.

India’s GDP growth of 7.4% in Q4 FY25 was primarily supported by a significant increase in capital formation, which grew by 9.4% year-on-year. This recovery is attributed to a rebound in the core sectors during the quarter, as reflected in high-frequency economic indicators. For the full fiscal year, capital formation grew by 7.1%.

Overall, the Indian economy grew by 7.4% in Q4 FY25, compared to 8.4% in the same quarter last year. On the back of this performance, the annual GDP growth for FY25 is estimated at 6.5%.

Most sectors showed improved performance in Q4. The industrial sector grew by 6.5%, while the services sector expanded by 7.3%. Within industry, the construction sector surged by 10.8%—a six-quarter high—while manufacturing posted a growth of 4.8%.

Private consumption remained strong in Q4, despite a slight slowdown in sequential growth. For FY25 as a whole, private consumption rose by 7.2%.

Exports performed well throughout the year, growing by 6.3%, while imports declined by 3.7%. The SBI report highlights that the strong export performance was front-loaded due to uncertainty over US tariffs. Meanwhile, a sharp 12.7% drop in imports in Q4 further helped lift GDP growth in the quarter to 7.2%.

With inputs from IANS