GDP may expand 7.4% in FY26

Nominal growth expected at 8%, slowest since FY21; fiscal deficit target likely to be met

- ASIT RANJAN MISHRA

India’s economy is estimated to grow by 7.4 per cent in FY26, up from 6.5 per cent in FY25, according to the first advance estimates of gross domestic product (GDP) released by the National Statistics Office on Wednesday.

The estimates indicate the economy’s resilience despite persistent external headwinds.

The growth outlook, however, has been aided by a GDP deflator at a five-decade low of 0.5 per cent (FY1975-76: -1.6 per cent), with nominal GDP growth projected at 8 per cent in FY26 —the slowest since the Covid-impacted FY21. The 60 basis point gap between nominal and real GDP growth in the current financial year is the narrowest since 2011-12.

The estimated real GDP growth of 7.4 per cent in FY26, marginally above the Reserve Bank of India’s (RBI's) revised projection of 7.3 per cent, assumes a deceleration in the second half of the financial year (October-March) to 6.9 per cent, from 8 per cent in the first half (April-September). This has been attributed to a high base effect and a likely moderation in the central government's spending growth.

The first advance estimates incorporate industrial production data for two additional months (October and November), along with select lead indicators for December. The figures remain subject to revision, with the new 2022-23 base year coming into effect in February and actual trends for the remainder of the financial year becoming available.