India’s GDP Forecast To Grow 7.4% In FY26 Amid Global Uncertainties

India is on a strong growth trajectory next year, with the country’s economy likely to register 7.4% growth in fiscal 2026. This is according to the first advance estimates that were released by the Ministry of Statistics this week. This is a result of strong performance registered by both the manufacturing and service sectors.

Nominal GDP is estimated to grow at 8%, which will be the basis for the Union Budget calculation in FY 2027. After a 6.5% increase in FY 25 and a whopping 9.2% increase in FY 24, the numbers seem to be stabilising for the economy post the challenging phase of the pandemic.

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Domestic Consumption and Investment Drive Growth

What the advance estimates reveal is that the growth momentum is led by strong household expenditure and fixed asset investments. In essence, the engine leading the growth of the economy continues to be the domestic demand factor.

Earlier, the Reserve Bank of India had forecast a slightly lower 7.3% growth rate for the year. This lower forecast was based on indications of robust manufacturing activity, good agricultural production, and a revival in rural and urban demand patterns. The RBI also projected economic growth of around 7% in the December quarter and 6.5% in the March quarter.

International Agencies Revise Outlooks

Global institutions have raised their forecasts too. The Asian Development Bank (ADB) revised its estimate for India’s FY26 GDP growth upward to 7.2% from 6.5%, citing domestic demand and export performance as the prime drivers. Similarly, India Ratings and Research, a part of the Fitch Group, also adopts the government’s projection of 7.4% in the current year and settles for a figure of 6.9% in FY27, citing the “triot of domestic reforms: income tax rate changes in the budget for FY26, improvements in the GST regime, and new foreign trade agreements with Oman, the UK, and New Zealand, which are expected to protect the economy from globalization threats, including the impact of new tariffs imposed by the United States.”

Impending Shift in Calculation Methodology

This advance estimate is the final GDP calculation based on the 2011-12 base year. The government will begin a new series of national accounts with a base year of 2022-23 on February 27th alongside the second advance estimates. Finance Minister Nirmala Sitharaman reacted to queries about the IMF's assessment of the quality of Indian data, saying, “The ‘C’ rating now is nothing but a hangover from the old base year. With the new base year, the basket of commodities and services will now be more contemporary.” The new base year will cause a new basket of commodities and services and help the Indian economic system align with the present economic conditions. Professional economists like EY India recommend that the new base year will cause a new basket of commodities and services and will not make a drastic impact on GDP growth. The GDP growth will be around 7.4%-7.6% for the present fiscal.