Net Exports Contribute 0.3 Percentage Points to FY26 GDP Growth, Turn Positive in Q4 Amid Trade Disruptions

India's External Sector Contributes to Modest Economic Growth in FY26

India's external sector appears to have made a modest positive contribution to economic growth in FY26, with net exports estimated to have added around 0.3 percentage points to headline GDP growth during the fiscal year. According to calculations by an economist, this represents a significant boost to the country's economy.

The contribution was uneven across quarters, with net exports subtracting 0.3 percentage points from growth in the June quarter. However, the external sector turned supportive in the September quarter, when it added 0.6 percentage points to growth. Unfortunately, the external sector again became a drag in the December quarter, shaving off 0.4 percentage points from growth. The sector recovered to contribute 0.4 percentage points in the March quarter.

While merchandise imports grew faster than merchandise exports during much of FY26, strong services exports likely helped cushion the impact on overall growth and external balances. This is evident from the growth rates of real exports and imports. Real exports of goods and services grew 6.3 percent in FY26, slowing from 6.6 percent in FY25. In contrast, real imports rose 7.1 percent compared with 6.4 percent in the year before that.

Read also: State Bank of India Mutual Fund Acquires 1.27% Stake in Adani Enterprises

The growth in exports accelerated in the March quarter, expanding 5.7 percent year-on-year from 3.8 percent in Q3 of FY26. This outpaced import growth of 1.9 percent from 7.2 percent. India's real GDP growth rose to 7.7 percent in FY26, while in the fourth quarter of the same fiscal it came in at 7.8 percent.

Private final consumption expenditure (PFCE), a key indicator of household spending, slowed to 7.1 percent during the fourth quarter of 2025-26 from 8.2 percent in the third quarter. However, PFCE grew 7.7 percent during the fiscal year of 2025-26, up from 5.8 percent in FY25. This indicates that households continued to drive economic growth, despite a slowdown in PFCE growth in the fourth quarter.