India’s economy expands faster than expected at 7.8% in fourth quarter

India’s economy, partly affected by economic disruptions resulting from the conflict in the Middle East, grew by 7.8% on an annual basis in the three months to the end of March, faster than expected.

according to Reuters pollThe economy is estimated to grow by 7.2% in the January-March period, below the 7.8% in the previous quarter.

Trade prospects improved sharply in the first half of the quarter, with India completing the “mother of all deals” with the European Union and getting the US to cut tariffs on its goods from 50% to 18%.

These rates were further reduced to 10% after the US Supreme Court rejected US President Donald Trump’s tariffs as illegal.

But then, at the end of February, the Iranian war began; This war has since become a serious risk to the Indian economy and is expected to harm growth and increase inflation.

India’s central bank on Friday raised its inflation forecast for the fiscal year ending March 2027 by 50 basis points to 5.1%, while lowering the economy’s growth forecast to 6.6% from the previously estimated 6.9%.

Energy supply disruptions resulting from the conflict have inflated India’s import bill, increasing pressure on the rupee, which is already taking a hit from record foreign investor outflows.

The world’s fastest-growing major economy is expected to feel the pinch of inflation as the government postpones global fuel price increases for several months and then passes them on to consumers in May.

As of April, inflation remains below the RBI’s 4% target, but India is expected to face weather disruptions due to El Niño this year; This could cause crop failures and raise food prices.

The Reserve Bank of India on Friday said policy had become “cautious” due to worsening global economic conditions.