The National Statistical Office (NSO) released the first advance estimates for the financial year 2025-26 on Wednesday, projecting India’s real GDP to grow at a robust 7.4 per cent.
This forecast represents a significant acceleration from the 6.5 per cent growth recorded in the previous year and surpasses the Reserve Bank of India’s earlier projection of 7.3 per cent.
Despite a stellar first half where growth touched 7.8 per cent and 8.2 per cent in the first and second quarters respectively, the government anticipates a moderation in the second half, with average growth expected to slow to 6.8 per cent. This resilient performance comes even as India navigates complex global trade headwinds.
Services & Manufacturing
The projected growth for the current fiscal year is primarily anchored by a buoyant tertiary sector and a strategic rebound in manufacturing activity.
While the manufacturing and construction sectors are expected to achieve a steady growth rate of around 7 per cent, the services sector remains the primary engine of the economy, forecast to expand significantly at 9.1 per cent.
Specifically, segments like financial and professional services, alongside public administration, are anticipated to grow by nearly 10 per cent. This domestic strength has provided a vital cushion against external pressures, such as the decline in merchandise exports due to global protectionism.
Fiscal Planning
These first advance estimates are a critical tool for policymakers as they form the statistical foundation for the upcoming Union Budget. While real growth remains strong, nominal GDP growth, which includes the impact of inflation, is pegged at 8 per cent, the lowest in five years.
This narrow gap between real and nominal figures suggests a period of relatively low inflationary pressure but presents a unique challenge for fiscal planning and tax revenue projections.
Prime Minister Narendra Modi hailed the figures, stating that the “Reform Express continues to gain momentum,” driven by a comprehensive investment push and the widespread adoption of digital public goods.
Sectoral Variations
Economists from leading institutions like ICRA and HDFC note that the projected second half slowdown to 6.8 per cent reflects a high base effect from previous years and seasonal adjustments in government spending patterns.
While the industrial sector shows resilience, the agriculture, forestry, and fishing sector is expected to see a more moderate growth of 3.1 per cent, compared to 3 per cent in the previous year.
This discrepancy highlights the uneven nature of the recovery, where high tech and service oriented industries are outpacing the primary sector. The data underscores the need for continued structural reforms to ensure that growth remains sustainable across all segments.
Sustaining Momentum
A significant aspect of this growth story is India’s ability to withstand international economic turbulence. Despite the imposition of trade tariffs by major partners and a general cooling of global demand, India’s internal consumption and government led infrastructure spending have kept the economy on an upward trajectory.
The Gross Value Added (GVA) is also projected to grow at 7.1 per cent, indicating healthy productivity across various economic activities.
As the government prepares the final budgetary allocations, the focus will likely remain on maintaining this 7 per cent plus growth path while managing the fiscal deficit in an environment of lower nominal growth.
The Logical Indian’s Perspective
At The Logical Indian, we celebrate the resilience of our economy, which continues to provide a glimmer of hope in a volatile global landscape. A 7.4 per cent growth rate is a testament to the hard work of millions of Indian citizens and small business owners who keep the wheels of progress turning.
However, we must ensure that this macro success translates into micro benefits for every household. As agriculture growth remains modest, we must prioritise rural incomes and equitable employment.
Economic numbers are meaningful only when they lead to a more harmonious, empathetic, and inclusive society where no one is left behind.
