India’s FY26 growth outlook improves as GDP grows 7.4% on strength in services

The economy is expected to grow faster in the current financial year, with real gross domestic product (GDP) expected to grow by 7.4 per cent in the 2025-26 financial year, compared to 6.5 per cent in the 2024-25 financial year, according to the first preliminary estimates released by the Ministry of Statistics and Program Implementation on Wednesday.

The projections, compiled by the National Statistics Office under the ministry, indicate that dynamic growth in the services sector remains the main driver of overall economic dynamics. Agriculture and utilities are expected to post more moderate gains.

Nominal GDP is estimated to grow by 8.0% in FY 2025-26.

On the supply side, real gross value added (GVA) is expected to grow by 7.3% during the year, largely supported by the strong expansion of the tertiary sector. Financial, real estate and professional services, as well as public administration, defense and other services, are expected to register a substantial growth rate of 9.9% at constant prices during the financial year 2025-2026.

Trade, hospitality, transportation, communications and broadcasting-related services are expected to grow 7.5% at constant prices during the year, reflecting the continued recovery and expansion of consumption-related services.

In the secondary sector, manufacturing and construction are expected to achieve a growth rate of 7.0% in the financial year 2025-2026, indicating stable industrial and infrastructure activity.

In contrast, growth in the primary and utility-related segments is more moderate. Agriculture and allied activities are expected to grow by 3.1% at constant prices, while electricity, gas, water supply and other utilities are expected to register a growth rate of 2.1% during the financial year 2025-26.

On the demand side, real private final consumption expenditure (PFCE), a key indicator of household consumption, is expected to grow by 7.0% over the year.

Investment activity is also expected to strengthen. Gross fixed capital formation (GFCF) is expected to grow by 7.8% in the financial year 2025-26, compared to a growth rate of 7.1% in the previous financial year, indicating continued support of capital expenditure to economic growth.

The country’s real GDP increased by 7.8% in the first quarter (April-June), reaching 8.2% in the second quarter (July-September). Third quarter figures will be published at the end of February.