India’s GDP growth seen at 7.4% in FY26: NSO

India’s gross domestic product (GDP) is estimated to grow at 7.4% in FY26, according to the first advance estimates released by the National Statistical Office (NSO), marking a sharp improvement from the 6.5% growth recorded in FY25.

Gross value added (GVA) growth is pegged at 7.3%, while nominal GDP growth is estimated at 8% in FY26, lower than the 9.8% expansion seen in the previous year. SBI Research, in its latest Ecowrap report, said the growth estimate is reasonable and broadly in line with historical trends, noting that the gap between Reserve Bank of India (RBI) and NSO projections typically remains within 20–30 basis points.

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The SBI Research team expects GDP growth to edge higher to around 7.5% in FY26, with an upward bias once the new GDP base year revision to 2022–23 is factored in. The second advance estimates are scheduled to be released on February 27, 2026.

On the sectoral front, services remain the key growth driver, with growth estimated at 9.1% in FY26, compared to 7.2% in FY25. All major services sub-sectors, including trade, transport, financial services and public administration, are projected to grow at a faster pace. Industry growth is estimated at 6%, supported by robust manufacturing growth of 7%, though mining activity is expected to contract by 0.7%.

Agriculture and allied activities are projected to grow at a slower pace of 3.1% in FY26, compared to 4.6% in the previous year, reflecting a moderation in farm sector performance.

On the demand side, government final consumption expenditure grew 5.2% in real terms, providing support to overall demand. Exports posted a healthy growth of 6.4%, while private consumption growth moderated to 7%, partly due to the slowdown in agriculture. Per capita consumption expenditure rose 6.1% during the year.

Investment activity showed signs of revival, with gross fixed capital formation growing 7.8% in real terms, higher than last year’s growth. Imports, however, expanded sharply by 14.4% in real terms, though SBI Research expects import growth to moderate in FY27 amid a softer energy price outlook.

On the fiscal front, the fiscal deficit stood at Rs 9.8 lakh crore at the end of November 2025, accounting for 62.3% of the budget estimate. SBI Research expects the FY26 fiscal deficit to be around Rs 15.85 lakh crore, marginally higher than the budgeted Rs 15.69 lakh crore, but the deficit-to-GDP ratio is likely to remain unchanged at 4.4% due to the revised GDP numbers.

Non-tax revenues are expected to offset lower tax collections, while overall expenditure is likely to come in lower than budgeted, helping maintain fiscal discipline, the report added.