India's Economy Outpaces Expectations: A Detailed Analysis

India's economy demonstrated resilience by recording a 7.8% growth in the October-December quarter, slightly exceeding the previous expectation of 7.6% for the full fiscal year. This growth was supported by a revised GDP data series that better reflects sectoral contributions and underlying economic activity.

Economists from EMKAY, DBS Bank, and Anand Rathi Group noted the improvements in the service sector and manufacturing, emphasizing the continuity in growth patterns from the previous series, rather than an anomaly. The recalibration also highlights challenges in nominal growth, which remains below 9%, affecting revenue and profit growth.

The newly rebased numbers have significant implications for markets, with equity outlooks improving due to strengthened corporate earnings, and government finances benefiting from enhanced tax revenues. However, despite the robust performance, the potential for further interest rate cuts remains slim, as inflation pressures might lead to a rate hike before the end of 2026.