Saturday, 28 Feb, 2026
Other service-based activities, including trade, hotels, transport, communication, and broadcasting-related services, are estimated to grow by 7.5 percent in real terms during the year. Photo courtesy: PixaBay
The estimates suggest that domestic demand, supported by services-led expansion, remains resilient and continues to anchor India’s growth outlook for the coming fiscal year.
India’s economy is projected to expand by 7.4 percent in real terms in FY26, as per the first advance estimates released by the Ministry of Statistics and Programme Implementation (MoSPI). This forecast represents a clear acceleration compared to the 6.5 percent growth recorded in FY25, indicating strengthening economic momentum amid a relatively challenging global environment. In nominal terms, gross domestic product is expected to grow by 8.0 percent in FY26, reflecting a combination of real output expansion and price dynamics. These first advance estimates were closely watched, as they served as a key reference point for the Union government while formulating policy priorities and fiscal strategy for Budget 2026.
Source: Ministry of Statistics & Programme Implementation
On the supply side, real gross value added is estimated to increase by 7.3 percent during FY26. The services sector continues to be the primary driver of overall growth, underscoring the sustained contribution of segments such as trade, transport, communication, financial services, and public administration. The estimates suggest that domestic demand, supported by services-led expansion, remains resilient and continues to anchor India’s growth outlook for the coming fiscal year. The services sector has emerged as the principal contributor to the estimated real GVA growth of 7.3 percent in FY 2025–26, with robust performance across key tertiary activities reinforcing overall economic expansion. Within the services segment, financial services, real estate, and professional services, along with public administration, defence, and other services, are projected to record a strong growth rate of 9.9 percent at constant prices. This reflects continued momentum in government spending, expanding financial activity, and sustained demand for professional and business services.
Source: Ministry of Statistics & Programme Implementation
Other service-based activities, including trade, hotels, transport, communication, and broadcasting-related services, are estimated to grow by 7.5 percent in real terms during the year. The steady expansion in these segments points to improving consumer mobility, tourism activity, and logistics demand, alongside continued growth in digital and communication services. In the secondary sector, manufacturing and construction are together projected to grow by 7.0 percent at constant prices in FY 2025–26. This indicates a recovery in industrial activity supported by infrastructure spending, capacity expansion, and sustained public and private investment, even as global headwinds continue to pose challenges for manufacturing.
Growth in the primary and utilities-related sectors is expected to be relatively moderate. The agriculture and allied activities sector is estimated to grow by 3.1 percent, reflecting normalisation after previous volatility, while electricity, gas, water supply, and other utility services are projected to expand by 2.1 percent, indicating steady but restrained growth in these areas.
On the demand side, real private final consumption expenditure is estimated to rise by 7.0 percent in FY 2025–26, suggesting resilient household consumption and improving consumer confidence. At the same time, gross fixed capital formation is projected to grow by 7.8 percent at constant prices, higher than the 7.1 percent growth recorded in the previous fiscal year, highlighting a continued uptick in investment activity and reinforcing the medium-term growth outlook.
India’s real gross domestic product, measured at constant prices, is estimated to reach ₹201.90 lakh crore in FY 2025–26, compared to the provisional estimate of ₹187.97 lakh crore in FY 2024–25. This reflects a real growth rate of 7.4 percent, underscoring a sustained expansion in economic activity over the year. In nominal terms, GDP at current prices is projected to rise to ₹357.14 lakh crore in FY 2025–26 from ₹330.68 lakh crore in the previous fiscal year, translating into a growth rate of 8.0 percent. The increase in nominal GDP captures both real output growth and prevailing price movements in the economy.
A similar trend is visible in gross value added, which provides a sector-wise view of economic performance. Real GVA at constant prices is estimated at ₹184.50 lakh crore in FY 2025–26, up from the provisional estimate of ₹171.87 lakh crore in FY 2024–25, registering a growth of 7.3 percent. This indicates broad-based improvement across economic sectors. In nominal terms, GVA is projected to increase to ₹323.48 lakh crore during FY 2025–26 from ₹300.22 lakh crore in the preceding year, reflecting a growth rate of 7.7 percent. Together, these estimates point to a steady strengthening of both production and value creation in the economy, providing a stable base for fiscal planning and policy formulation in the coming year.
Radhika Rao, Executive Director and Senior Economist at DBS Bank, observed that the stronger-than-anticipated nominal GDP base in FY25 provides a degree of protection against the risk of missing fiscal deficit targets in FY26 purely due to a moderation in growth. While nominal GDP growth for FY26 is projected to remain below 9 percent, which is weaker than the 10.1 percent assumed in the Union Budget, she noted that the figure is broadly in line with the revised estimate numbers for FY25. As a result, the higher nominal base from the previous year helps cushion fiscal arithmetic and reduces pressure on the government’s deficit calculations.
However, Rao cautioned that maintaining the fiscal deficit target in FY26 is still likely to require restraint on the expenditure side, with some degree of spending compression expected. Looking ahead to FY27, she pointed out that higher deflators could support stronger nominal GDP growth, improving the overall fiscal outlook. Rao also highlighted that greater attention will be focused on the second advance estimates due in late February, as these will be based on the new GDP series and will include backdated revisions. According to her, the updated series is expected to incorporate improved methodologies, provide finer sector-level detail, and better reflect shifts in sectoral weightage that have taken place in the Indian economy over the past decade.
