As per First Advance Estimates (FAE) of National Income released by National Statistical Organization (NSO), India’s real GDP and GVA growth for FY26 are projected at 7.4% and 7.3% respectively. The projected GDP growth, while broadly aligns with RBI’s estimate of 7.3%, stands marginally higher than Acuite’s expectation of 7.2%.

Key takeaways 

• FY26 GDP is estimated to expand by 7.4% YoY, marking a notable acceleration from 6.5% YoY in FY25. 
• Nominal GDP, which becomes a critical input for Budget arithmetic, is projected at Rs 357.1 lakh cr – translating into annualized growth of 8.0% (the slowest pace since the Covid-impacted FY21) compared with 9.8% in FY25.
• In absolute terms, nominal GDP is same as budgeted, and thus accords no upside to fiscal deficit target of 4.4% of GDP for FY26. Having said, due to revision to FY25 data, growth in nominal GDP undershoots budgeted target of 10.1%.
• With H1 FY26 GDP growth at 8.0%YoY, the FAE implies a moderation in growth to 6.9% YoY in H2 FY26, led by manufacturing, construction and trade, hotels & communication on supply side and private consumption on the demand side. 

Granular highlights

• On the sectoral side, growth drag is seen in the sectors of Mining, Utilities, Construction and Agriculture in FY26. 
• More than offsetting the drag is incremental buoyancy in Manufacturing, alongside broad-based services sector upside, as underscored by resilience in Trade, hospitality and communication services, Financial, real estate and professional services and Public administration, defense & miscellaneous services. 
• On the demand side, the estimated acceleration in FY26 GDP growth is primarily on account of government consumption (up 5.2% vs 2.3% in FY25) and investments (up 7.8% vs 7.1% in FY25). Private consumption is estimated to see a marginal deceleration in FY26 (to 7.0% vs 7.2% FY25)– which is a bit perplexing given the recent strength in high frequency indicators, especially post GST rationalization.

Inferences 

The strong growth outcome in FY26 has been a derivative of varied themes:

• Central government capex is budgeted to record 10.1% YoY in FY26, with spending up 28.1%YoY on an Apr–Nov FYTD26 basis (partly reflecting a favourable base effect stemming from subdued election-related spending last year). That said, government capex growth is likely to moderate in H2, to be able to meet the full year budgeted growth.  
• Private consumption growth has been supported by good monsoon, soft inflation, income tax and GST rate cuts along with monetary and regulatory easing from the RBI. 
• Notwithstanding the slowdown in global demand and the impact of US imposed 50% tariff on select goods, domestic exports on account of front-loading have risen by 6.5% FYTD26 basis (vs 3.6% last year). Government support to exporters along with Rupee depreciation is allowing exporters in select sectors to hold on to their export market share. 

Other observations

• Having said, the unusually narrow 0.6 ppts wedge between nominal and real GDP growth (the lowest in nearly 4 decades), driven by a historically low deflator bodes unfavourably for tax collections. 
• NSO’s FAE are projections based on 6-8 months of actual data. Having said, looking at high frequency indicators as of now especially on the consumption front, there could be a marginal upside to FY26 PFCE estimate. 
• Separately, a new GDP series (base 2022-23) will be released in Feb-26, basis improved methodology as well as enhanced coverage of economic activity. While it is difficult to outguess growth numbers that the new series will throw up, but comparison of old and new series will be inconsistent. A trend analysis may have to wait until NSO releases back-tested data.   

Table 1: India’s GVA and GDP: Sectoral break-up