Fast-growing Indian economy forecasted to maintain top position in FY26, according to SBI report.
The State Bank of India (SBI) forecasts a promising future for India's economy, predicting it will continue as the fastest-growing major economy in FY26, with a GDP growth rate anticipated to be within the range of 6.3% to 6.5%. The economy's resilience is attributed to solid macroeconomic fundamentals, a thriving financial sector, and a sustained dedication to long-term development objectives, according to the SBI report.
However, the report does not specify the exact factors that could potentially hinder this growth trajectory. Generally, potential threats to India's economic growth may include external and geopolitical uncertainties, inflationary pressures, and global economic downturns, although these are not explicitly mentioned in the report.
The Q4 GDP growth of 7.4% was driven by a significant uptick in capital formation, which demonstrated an annual growth rate of 9.4%. This improvement in capital formation was fueled by the revival in the core sector during Q4, as evidenced by high-frequency indicators. Overall GDP growth for FY25 stands at 7.1%.
India's economy grew by 7.4% in Q4 FY25, a slight decrease from the 8.4% growth in the same period the previous fiscal year. This growth, along with the Q4 figures, has resulted in an estimated annual growth rate for FY25 of 6.5%.
Almost all sectors exhibited better growth in Q4 FY25. The industry sector grew by 6.5%, and the services sector expanded by 7.3%. Within the industry during Q4, the construction sector had a significant increase of 10.8%, the highest in the past six quarters, while the manufacturing sector grew by 4.8%.
Private consumption maintained its strong growth in Q4, although there was a slight deceleration in sequential growth rates. Overall, private consumption registered a growth of 7.2% for FY25. Export demand was robust throughout the year, registering a growth of 6.3%, while imports contracted for the entire year by 3.7%.
According to the SBI report, this growth was largely front-loaded due to export stimulus amid U.S. tariff uncertainty, and the highest contraction in imports happening in Q4 at 12.7% was another factor in pulling the overall GDP growth to 7.2% in Q4.
- The resilience of India's economy, as predicted to be the fastest-growing major economy in FY26, could potentially be bolstered by investments in the decentralized finance (defi) sector, a growing subsector of the financial industry.
- The solid macroeconomic fundamentals, thriving financial sector, and sustained dedication to long-term development objectives, as highlighted by the SBI report, make India an attractive market for businesses looking to expand their operations.
- However, to maintain this growth trajectory, it's crucial for the government and private sectors to address potential issues such as inflationary pressures, external and geopolitical uncertainties, and global economic downturns, which could affect India's economy in the future.
