India FY26 GDP Growth Seen At Two-Year High Of 7.4%, Nominal GDP Misses Poll
India's economy is projected to achieve 7.4% real GDP growth in FY26, marking a two-year high driven by robust services sector performance at 9.1% and manufacturing acceleration to 7%. While this represents strong economic momentum, nominal GDP growth at 8% missed poll estimates of 8.3%, falling from 9.8% in FY25. The growth is supported by increased government spending, steady private consumption, and improved investment activity, despite challenges in agriculture and mining sectors.
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India's economy is set to achieve its strongest growth in two years, with the gross domestic product projected to expand 7.4% in real terms during the financial year 2025-26, according to the First Advance Estimates released by the Ministry of Statistics. The projections highlight the country's economic resilience amid global uncertainties, though nominal GDP growth estimates fell short of market expectations.
Economic Growth Trajectory
The projected 7.4% real GDP growth rate for FY26 represents a significant acceleration from the 6.5% recorded in FY25, marking the highest growth rate achieved by the Indian economy in two years. However, nominal GDP growth, which accounts for inflation, is estimated at 8% for FY26, substantially lower than the 9.8% recorded in FY25 and marginally below the CNBC-TV18 poll estimate of 8.3%.
| Financial Year | Real GDP Growth | Nominal GDP Growth |
|---|---|---|
| FY25 | 6.5% | 9.8% |
| FY26 (Projected) | 7.4% | 8.0% |
| Poll Estimate FY26 | - | 8.3% |
Real gross value added growth is projected to rise to 7.3% in FY26, compared with 6.4% in the previous year, driven primarily by robust performance in the services sector.
Sectoral Performance Analysis
The services sector emerges as the primary growth engine, with services estimated to grow at 9.1% in FY26, up from 7.2% in FY25. Within services, financial services, real estate and professional services are projected to expand 9.9%, matching the growth seen in public administration, defence and other services.
| Sector | FY26 Growth | FY25 Growth |
|---|---|---|
| Services | 9.1% | 7.2% |
| Manufacturing | 7.0% | 4.5% |
| Construction | 7.0% | 9.4% |
| Agriculture | 3.1% | 4.6% |
| Mining | -0.7% | 2.7% |
| Electricity | 2.1% | - |
Manufacturing growth is expected to accelerate significantly to 7% from 4.5% in FY25, while construction growth is estimated at 7%, down from 9.4% in the previous year. Trade, hotels and transport services are projected to grow 7.5%, underscoring the continued strength of the services-led recovery.
Expenditure Components and Investment Activity
From the expenditure perspective, private final consumption expenditure growth is estimated at 7% in FY26, marginally lower than 7.2% in FY25, indicating steady but moderated household demand. Government final consumption expenditure is projected to grow 5.2%, sharply higher than 2.3% in FY25, reflecting increased public spending support.
| Expenditure Component | FY26 Growth | FY25 Growth |
|---|---|---|
| Private Consumption (PFCE) | 7.0% | 7.2% |
| Government Consumption (GFCE) | 5.2% | 2.3% |
| Gross Fixed Capital Formation | 7.8% | 7.1% |
| Exports | 6.4% | 6.3% |
Gross fixed capital formation, a key indicator of investment activity, is projected to rise 7.8%, up from 7.1% in FY25, pointing to continued traction in capital expenditure. Export growth is estimated at 6.4%, broadly in line with the 6.3% expansion recorded in the previous year.
Economic Outlook and Challenges
The projected growth comes despite significant external pressures affecting the global economy, with India's economic expansion remaining resilient in the face of global trade challenges and geopolitical uncertainty. Industries are estimated to grow 6.2% in FY26, compared with 5.9% in FY25, supported by improved manufacturing performance despite weakness in mining and electricity sectors.
The agriculture and allied sector growth is expected to moderate to 3.1% from 4.6% in FY25, while mining is projected to contract by 0.7% compared with 2.7% growth in the previous year. The balanced performance across services and manufacturing sectors, combined with steady agricultural growth, indicates a well-rounded economic expansion that supports sustained development momentum.
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