New Delhi: India’s GDP growth for FY26 is estimated at 7.4%, driven by a strong rebound in private consumption and investment, according to the Economic Survey 2025-26 tabled in Parliament on Wednesday.
The Survey projects real GDP growth of 6.8–7.2% for FY27, with India’s potential growth seen at around 7%, underscoring medium-term macroeconomic stability.
Domestic demand remained the backbone of growth in FY26. The share of private final consumption expenditure (PFCE) in GDP rose to 61.5%, aided by low inflation, steady employment and rising real incomes. Rural demand benefited from a favourable monsoon and improved farm output, while urban consumption showed signs of recovery following tax rationalisation measures.
Investment momentum also stayed firm, with gross fixed capital formation (GFCF) estimated at 30% of GDP. GFCF expanded 7.6% in the first half of FY26, outpacing last year’s growth and exceeding the pre-pandemic average, reflecting sustained public capex and improving private investment sentiment.
On the supply side, agriculture and allied activities are expected to grow 3.1% in FY26, supported by healthy monsoons and stable growth in livestock and fisheries. The industrial sector showed visible strength, with manufacturing expanding 8.4% in H1 FY26, while construction activity remained resilient on the back of infrastructure spending.
Services continued to be the main growth driver, with gross value added (GVA) rising 9.3% in the first half of FY26 and an estimated 9.1% growth for the full year. Most sub-sectors recorded growth above 9%, indicating a broad-based expansion, the Survey noted.
Inflation trends turned decisively benign during FY26, with headline CPI inflation easing to 1.7% in April–December, led by sharp disinflation in food prices. The Survey said subdued inflation improved purchasing power and supported consumption, while core inflation pressures remained contained once precious metals were excluded.
The banking sector’s health improved further, with gross NPAs declining to a multi-decade low of 2.2%, alongside stable slippage ratios and higher profitability. Monetary easing since February 2025 — including 125 basis points of repo rate cuts and liquidity infusion through CRR reductions and open market operations — has been effectively transmitted to lending rates, the Survey said.
On the external front, India’s total exports touched a record $825.3 billion in FY25, with services exports continuing to offset the merchandise trade deficit. The current account deficit remained moderate at 0.8% of GDP in H1 FY26, while forex reserves provided over 11 months of import cover, offering a strong liquidity cushion.
The Survey also flagged key structural reforms, including GST rationalisation, labour code implementation, and the conclusion of the India-EU free trade agreement, as supportive of long-term growth. However, it cautioned that global trade uncertainty, geopolitical tensions and tariff disruptions could weigh on exports and sentiment in the near term.
Overall, the Economic Survey painted a picture of steady growth with manageable risks, stating that healthier balance sheets, low inflation and sustained public investment provide buffers against external shocks, even as FY27 is expected to be a year of adjustment amid global uncertainty.