FY26 GDP to Hit 7.4% on Strong Mfg, Services Push

New Delhi: India is likely to grow at a faster pace of 7.4 per cent during 2025-26, compared to 6.5 per cent in the previous year, driven by a strong performance in the services and manufacturing sectors, thus retaining its position as the world's fastest growing major economy. The Gross Domestic Product (GDP) had expanded by 9.2 per cent during 2023-24.

The First Advance Estimates of national income released by the government on Wednesday, also showed that Gross Value Added (GVA) is estimated to grow at 7.3 per cent during the current financial year as against 6.4 per cent in the year-ago period.

The manufacturing sector is expected to post a 7 per cent growth (GVA) in the current fiscal, up from 4.5 per cent in 2024-25.

The growth in the services sector has been estimated at 9.1 per cent versus 7.2 per cent in 2024-25, according to the data released by National Statistics Office (NSO), Ministry of Statistics & Programme Implementation (MoSPI).

Growth in the agriculture and allied sector moderated to 3.1 per cent in the current fiscal from 4.6 per cent in the 2024-25.

"Real GDP or GDP at constant prices is estimated to attain a level of Rs 201.90 lakh crore in FY 2025-26, against the provisional estimates (PE) of GDP for FY 2024-25 of Rs 187.97 lakh crore, registering a growth rate of 7.4 per cent," NSO said.

The nominal GDP, which factors in inflation, is estimated to attain a level of Rs 357.14 lakh crore in 2025-26, against Rs 330.68 lakh crore in 2024-25, showing a growth rate of 8 per cent. The government had estimated the nominal GDP expansion at 10.1 per cent in the Union Budget presented in February last year.

The First Advance Estimates are used in preparation of the Union Budget, likely to be presented on February 1.

In US dollar terms, the GDP is likely to be USD 3.97 trillion (1 USD = Rs 90).

According to World Bank's China economic update issued in December, the country is estimated to grow at 4.9 per cent in 2025 and 4.4 per cent in 2026.

The NSO's GDP estimate for the current fiscal is marginally higher than the Reserve Bank's projection of 7.3 per cent.

The real private final consumption expenditure (PFCE) has been estimated to attain a growth rate of 7 per cent during 2025-26.

Gross fixed capital formation (GFCF) has been estimated to have 7.8 per cent growth rate at constant prices during 2025-26, compared to 7.1 per cent in previous financial year.

Despite global headwinds, the Indian economy has been on a steady trajectory, and the government has come out with various reform measures this fiscal, including income tax relief and reduction in GST rates.

Commenting on the data, Rahul Agrawal, senior economist, ICRA, said the rating agency does not expect a fiscal slippage over the targeted 4.4 per cent of GDP, as higher-than-budgeted non-tax revenues and likely expenditure savings would provide a buffer against the expected miss on taxes.

Dharmakirti Joshi, Chief Economist Crisil, said 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.

"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," he said.

Jahnavi Prabhakar, Economist, Bank of Baroda, said he Indian economy remains resilient on the back of the festive demand and steady improvement in economic activity.

Strong festive sales along with GST rationalization 2.0 and income tax cuts are expected to boost the consumption sector. Even the post festive demand has been holding up, Prabhakar said.