By Shubham Batra and Manoj Kumar
NEW DELHI, June 5 (Reuters) - India's economy grew at an unexpectedly strong 7.8% on-year in the January-March quarter, the government said on Friday, as better farm output and brisker construction activity helped offset weakening external demand emanating from the Middle East conflict.
The print, the second in an updated data series with a revised base year and wider coverage, was well above a forecast of 7.2% growth in a Reuters poll of economists.
Compared with the
previous three months, however, the January-March reading marked a marginal slowdown. The government revised up growth for the previous three months to a reading of 8.0% from an earlier 7.8%.
Gross value added, a more accurate measure of underlying economic activity, grew 7.9% during the January-March quarter, the data showed. GVA strips out the volatile components of national accounts such as indirect taxes and government subsidies.
India estimates GDP growth for the full year that ended in March at 7.7%, the National Statistics Office said, compared with a forecast of 7.6% from February.
The country's chief economic adviser, V Anantha Nageswaran, had forecast economic growth in the current fiscal year at 7% to 7.4% in a projection issued before the Middle East conflict began.
India has been one of the economies hardest hit by the Iran war that has stretched into a fourth month with no immediate prospects of a peace deal between Washington and Tehran. India is the world's third-largest crude importer and consumer, and it is heavily dependent on supplies from the Middle East.
The Middle East war is seen pulling down growth in the Indian economy to 6.6% this fiscal year, the central bank said earlier in the day, as it kept its benchmark interest rate unchanged while signalling a possible hawkish shift due to inflation pressures and weakness in the rupee.
Domestic inflation is set to pick up and fiscal and current account balances are set to widen, which has battered financial markets.
A disappointing monsoon, with the lowest rainfall in 11 years, could hurt growth going ahead.
Manufacturing output rose 7.3% year-on-year in January-March, compared with a revised expansion of 12.8% in the previous quarter, while construction activity stood at 8.4%, up from revised growth of 6.7% in the previous quarter.
Growth in farm output, a sector which employs more than 40% of the country's enormous workforce, came in at 3.6% in the fourth quarter of 2025/26 compared with a revised 1.7% a quarter earlier.
(Reporting by Shubham Batra and Manoj Kumar in New Delhi; Editing by Hugh Lawson)
