India's GDP to grow at 7.4% in FY26: Govt

New Delhi: India’s economic growth is expected to accelerate to 7.4% in the financial year ending March 2026, sharply higher than 6.5% expansion recorded in the previous year, the National Statistics Office (NSO) said on Wednesday.

As per the first advance estimates of gross domestic product (GDP) for 2025-26 released by the NSO, economic growth in the current fiscal is set to exceed the government’s earlier projection of 6.3–6.8%. In the first half of the fiscal, the GDP growth stood at 8%.

While the real economic growth at constant 2011-12 price is set to exceed the budgetary expectation, the nominal GDP is likely to fall short. Nominal GDP growth at current price is projected at 8% in 2025-26, which is lower than the budgetary assumption of 10.1% and the previous year’s record of 10.4%.

The gap between nominal and real GDP growth for this fiscal is pegged at 60 basis points (0.60%), the lowest since 2011-12. This is because of low inflation. Both wholesale and retail price inflation are projected to be at near record lows in the current fiscal.

“India’s growth momentum has sustained despite elevated global uncertainty due to tariff tensions, riding on accommodative monetary and fiscal policies, robust corporate balance sheets, and favourable developments such as above-normal monsoons and low crude oil prices,” said Dharmakirti Joshi, Chief Economist at Crisil.

The government’s revenues are likely to be impacted due to slower-than-expected growth in nominal GDP as the tax collections are dependent on the current prices.

The official estimate on the key macroeconomic data comes weeks ahead of the Union Budget, which is likely to be presented on February 1.

Analysts said the government is likely to meet the 4.4% fiscal deficit target helped by higher-than-budgeted non-tax revenues and cut in expenditure. “We believe that even though the tax revenues are likely to be lower than the budgeted for FY26, non-tax revenue will be on the higher side thereby not impacting the overall receipts much,” SBI Group Chief Economic Advisor Soumya Kanti Ghosh said.

“Total expenditure is also expected to be lower, leading to a fiscal deficit of Rs 15.85 lakh crore compared to the budgeted Rs 15.69 lakh crore. With the new GDP figure, the fiscal deficit as a percentage of GDP is likely to remain unchanged at 4.4%,” Ghosh added.

Services sector growth is estimated to accelerate to 9.1% in the current financial year from 7.2% in the previous year. All the sub-sectors under services are estimated to grow at a higher pace, compared to last year.

However, a significant deceleration is projected in the agriculture sector, with real growth falling to 3.1% in 2025-26 from 4.6% in the previous year.

Nominal growth rate of gross value added (GVA) of agriculture and allied activities is estimated to dip to a record low of 0.8% in the current financial year from 10.4% recorded in the last fiscal.

This is because of a sharp drop in food price inflation. While the low inflation has provided relief to consumers, it has impacted farmers negatively by hitting their earnings.

As per the NSO data, India’s real GDP is estimated to grow to Rs 201.90 lakh crore in 2025-26 from Rs 187.97 lakh crore in the previous year. The nominal GDP is estimated to grow to Rs 357.14 lakh crore in the current fiscal from Rs 330.68 lakh crore recorded in 2024-25.

The per capita national income is estimated to increase by Rs 16,025 this year to Rs 2,47,487.

FILE PHOTO: A worker operates a machine inside a small scale manufacturing unit in Mumbai India February 1 2023. REUTERS/Niharika Kulkarni/File Photo

Employees stitch clothing material for dresses at the apparel manufacturing unit at Bhiwandi in the Thane district of India