India’s GDP seen growing at 7.4% in FY26 despite global tariff headwinds

India’s economy is projected to grow at a robust 7.4 per cent in real terms in FY 2025–26, up from 6.5 per cent in FY25, according to the First Advance Estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) on Wednesday. The forecasted growth by the government is above the 7.3 per cent projected growth by the RBI.

The data highlighted the continued resilience of the Indian economy, with services emerging as the principal growth engine even as agriculture and utilities post more moderate gains. With this growth for FY26, India again earns the distinction of being one of the fastest-growing economies in the world. However, nominal GDP growth is likely to grow at 8 per cent against 9.3 per cent nominal growth last year.

Gross Value Added (GVA), a key measure of underlying economic activity, is expected to grow 7.3 per cent in real terms, signalling broad-based expansion across sectors. MoSPI said the acceleration in growth is largely being driven by the tertiary sector, which continues to outperform other segments of the economy. “Buoyant growth in the services sector has been found to be a major driver in the estimated real GVA growth rate of 7.3 per cent in FY 2025–26,” the release noted

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Within services, financial, real estate, and professional services, along with public administration, defence and other services, are estimated to record a sharp 9.9 per cent growth at constant prices. Trade, hotels, transport, communication and broadcasting-related services are projected to expand 7.5 per cent, reflecting sustained urban demand, improved mobility and rising formalisation

The secondary sector is also expected to maintain steady momentum. Manufacturing and construction are both projected to grow 7 per cent, supported by infrastructure spending, improving capacity utilisation and continued public capital expenditure. However, growth in electricity, gas, water supply and other utility services is estimated at a relatively modest 2.1 per cent, pointing to uneven performance within industrial activities

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On the demand side, the estimates highlight improving domestic consumption and investment trends. Private Final Consumption Expenditure (PFCE), a proxy for household demand, is projected to grow 7 per cent in real terms in FY26. Similarly, Gross Fixed Capital Formation (GFCF), which measures investment, is expected to grow 7.8 per cent, higher than 7.1 per cent in FY25, indicating sustained capex-led growth.

Government spending is also set to rise, with Government Final Consumption Expenditure (GFCE) projected to grow 5.2 per cent, reflecting continued fiscal support even as authorities balance consolidation pressures.