Indian Economy News

India’s GDP growth for FY26 is estimated at 7.4%, driven by the double engine of consumption and investment

The economy is cruising along, and the Economic Survey for 2025-26 indicates that real GDP growth of 7.4% is expected in FY26. The engine is not one-tracked; it is driven by strong consumption and increasing investments, making India the fastest-growing major economy for the fourth consecutive year. Private final consumption expenditure has increased to 61.5% of GDP, indicating strong domestic demand due to low inflation, jobs, and increasing purchasing power. Gross fixed capital formation has reached 30.0% of GDP, and investment activity has grown 7.6% in the first half of FY26, surpassing pre-pandemic levels. The agricultural and allied sector is set to register an increase of 3.1%, with agricultural activities contributing to overall rural demand. The industrial segment is also gaining momentum, with manufacturing growing 8.4% in H1 FY26, while services Gross Value Added (GVA) increased 9.3% in the same period, indicating balanced and broad-based growth. Exports (merchandise and services) reached a record high of US$ 825.3 billion in FY25, reflecting resilience in external demand in the face of global uncertainties.
Inflation has cooled significantly, with headline CPI declining to 1.7% in FY26 (April-December), due to favourable supply conditions and disinflation in the food group. The fiscal policy remained non-expansive, supported by strong tax revenues and controlled spending, while gross non-performing assets (NPAs) in banks declined to 2.2%, indicating improved financial stability. The external sector remained comfortable, with foreign exchange reserves covering over 11 months of imports and a small current account deficit of 0.8% of GDP in H1 FY26. Looking forward, the Survey projects real GDP growth of 6.8-7.2% in FY27, indicating that the momentum is expected to continue on the back of strong domestic demand, investment, and stable policies, despite looming global challenges.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.