Amid rising US tariffs, India on Wednesday projected economic growth of 7.4 per cent in fiscal 2025–26, up from 6.5 per cent in the previous year, according to the first advance estimates of gross domestic product released by the National Statistics Office under the Ministry of Statistics and Programme Implementation.
The projection exceeds the Reserve Bank of India’s (RBI's) estimate of 7.3 per cent and is higher than last year’s 6.5 per cent. Nominal GDP, which includes inflation, is expected to grow 8 per cent, compared with 9.7 per cent last year. These figures will serve as the base for the federal union budget to be presented on 1 February.
According to Dharmakirti Joshi, Chief Economist at Crisil, "Growth in real GDP this fiscal will be 7.4 per cent, nearly 100 basis points higher than anticipated at the start of the fiscal year." He added, "That, however, does not hold for nominal GDP growth, which is estimated at 8 per cent, way short of the budgetary assumption of 10.1 per cent. The 60 basis point gap between nominal and real GDP this fiscal will be the lowest since 2011-12."
"Despite geopolitical uncertainty and a turbulent global landscape, India’s growth story shows strong signs of resilience. The real GDP is estimated to increase to 7.4 per cent (Y-o-Y) in FY25-26 as compared to 6.5 per cent (Y-o-Y) in FY24-25," said Rajeev Juneja, President, PHDCCI
Service, Manufacturing, And Agriculture
"Nominal GDP is estimated to grow at 8.0 per cent in FY25-26. Buoyant growth in the services sector is a major driver in the estimated real GVA growth rate of 7.3 per cent in FY25-26," the estimates noted. They further highlighted that the financial, real estate & professional services, along with public administration, defence, and other services in the tertiary sector, are expected to achieve 9.9 per cent growth at constant prices.
"Trade, hotels, transport, communication and services related to the broadcasting sector have been estimated to grow by 7.5 per cent at Constant Prices in FY25-26," the release added.
"Real GVA is estimated to grow at 7.3 per cent in FY25-26 as compared with 6.4 per cent during FY24. This higher GVA growth is led by an upswing on a year-on-year basis in the tertiary sector (9.1 per cent) and secondary sector (6.6 per cent) in FY25-26 as compared with FY24," said Juneja.
Within the secondary sector, manufacturing output expanded 7.5 per cent, up from 4.5 per cent last year, while construction is expected to grow 7 per cent, lower than 9.4 per cent in FY24. Within the tertiary sector, financial, real estate & professional services and public administration, defence & other services are projected to grow 9.9 per cent, reflecting steady development boosted by structural policy reforms.
The agriculture and allied sector is estimated to grow 3.1 per cent, lower than 4.6 per cent in FY24. The electricity, gas, water supply, and other utility services sector is projected to register moderate growth of 2.1 per cent in GVA at constant prices.
"Real Private Final Consumption Expenditure (PFCE) has been estimated to attain a growth rate of 7.0 per cent during FY 2025-26," the report added. Government spending is also expected to rise 5.2 per cent, up from 2.3 per cent last year.
Investment And Infrastructure
On the investment front, Gross Fixed Capital Formation (GFCF) is projected to grow 7.8 per cent at constant prices, compared with 7.1 per cent in the previous fiscal. Rising industrial output, improving credit flows, and deeper market reforms are supporting momentum, positioning India as one of Asia’s fastest-growing major economies, despite external pressures.
"Of late, the government has been advancing domestic reforms, including deregulation, to improve the business climate and enhance the economy’s long-term growth potential. These measures could have a positive impact on private investments, which are beginning to show some signs of improvement," said Dharmakirti Joshi, Crisil.
During FY25-26, the government implemented income tax relief for the middle class and lowered GST rates across a broad range of products from 22 September. These measures boosted consumption by increasing disposable income and reducing the cost of everyday goods. GST cuts, in particular, enhanced affordability and encouraged households to step up discretionary spending, supporting growth across FMCG, consumer durables, and services.
India’s economic momentum strengthened in the second quarter of FY25-26, with GDP growth reaching a six-quarter high of 8.2 per cent, up from 7.8 per cent in the April–June quarter. The economy had recorded growth of 6.5 per cent and 9.2 per cent in the previous two fiscal years.
Looking ahead, the first GDP growth data based on the revised series with 2022–23 as the base year will be released on 27 February, while the first inflation data with the revised base year will be available on February 12, according to the Ministry of Statistics and Programme Implementation. The first IIP data with the revised base year of 2022–23 will be released on 26 May. The revised base for inflation will be 2024, and for IIP, it will be 2022–23. |
