New Delhi, Jan 08, 2026 – India’s economy is on track to grow at 7.4% in the ongoing fiscal year, according to the first advance estimates of GDP released by the National Statistical Office (NSO) on Wednesday. Growth has been driven largely by manufacturing, services, and government expenditure, painting a picture of resilience despite ongoing global economic uncertainties.

While the fiscal year still has three months to go, the advance estimates provide an early gauge of economic performance and set the stage for the Union Budget later this month. Notably, the projected growth aligns closely with the Reserve Bank of India’s December Monetary Policy Committee forecast of 7.3%, reaffirming expectations of steady growth.

Key Drivers: Manufacturing, Services, and Government Spending

The growth performance is uneven across sectors:

• Manufacturing accelerated from 4.5% in 2024-25 to 7% in 2025-26.
• Services rose from 7.2% to 9.1%, reflecting strong consumption and export demand.
• Agriculture, however, slowed from 4.6% to 3.1%, reflecting subdued rainfall and low commodity inflation.
• Construction growth eased from 9.4% to 7%.

On the expenditure side:

• Private Final Consumption Expenditure (PFCE) dipped slightly from 7.2% to 7%,
• Government Final Consumption Expenditure (GFCE) rose from 2.3% to 5.2%,
• Gross Fixed Capital Formation (GFCF) increased from 7.1% to 7.8%, indicating a pickup in public investment and infrastructure spending.

The Gross Value Added (GVA) growth, which excludes net indirect taxes, rose from 6.4% to 7.3%, reflecting the contribution of high-performing sectors like manufacturing and services.

Low Inflation Keeps Nominal Growth in Check

While 7.4% is a robust real growth rate, low inflation has kept nominal GDP growth at 8%, below the budgeted 10.1% assumption. Nominal GDP matters most for revenue projections, fiscal deficit calculations, and public income, because it reflects actual monetary value rather than inflation-adjusted growth.

For example, the agriculture sector, with 3.1% real growth, saw nominal GVA growth of only 0.8%, underscoring the impact of low food inflation. Despite this, the NSO’s estimates suggest that the absolute nominal GDP of ₹357.13 lakh crore slightly exceeds the ₹356.97 lakh crore assumed in the 2025-26 Union Budget, ensuring that fiscal targets remain feasible.

Implications for the Union Budget

Advance estimates are closely watched by policymakers, as they provide the only full-year GDP estimates before the budget. Even though nominal growth is lower than expected, the higher absolute GDP value provides fiscal leeway. Revenue and deficit projections are unlikely to be adversely affected, barring unexpected changes in GST collections or other revenue streams.

Economists caution that these are preliminary estimates, extrapolated from data available only until November 2025. Revisions are likely with the release of the new GDP series in February, which will incorporate base-year changes and other adjustments.

Madhavi Arora, Chief Economist at Emkay Global, noted: “FY27 is expected to see a normalization of one-off GDP deflator effects, bringing real growth closer to 6.5% and nominal growth back towards 10%, based on the current GDP series.”

Bottom Line

The NSO’s first advance estimates confirm India’s continued position as the fastest-growing major economy in the world. Strong growth in manufacturing, services, and government spending offsets slowdowns in agriculture and construction, while low inflation ensures that real incomes remain stable. For the Union Budget, the numbers provide a favorable backdrop, suggesting that fiscal targets can be met without major course corrections.

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