New Delhi: India’s economy is projected to expand by 7.4 per cent in the current financial year, retaining its position as the world’s fastest-growing major economy even as global trade tensions and higher US tariffs weigh on activity.
The First Advance Estimates released on Wednesday by the Ministry of Statistics and Programme Implementation placed growth for 2025-26 at 7.4 per cent, ahead of the 7.3 per cent projection of the Reserve Bank of India and above the government’s earlier range of 6.3 to 6.8 per cent. The economy had expanded by 6.5 per cent in the previous fiscal year.
The estimates show that the stronger outcome comes despite the United States imposing punitive tariffs of up to 50 per cent on Indian goods, a move that heightened trade frictions and raised concerns about exports. Policymakers have responded with measures including a revamp of the goods and services tax that lowered rates on hundreds of items, long-pending labour reforms, income tax relief and reductions in interest rates. These steps, alongside low inflation and firm rural demand, have helped sustain activity. According to the National Statistics Office, real GDP at constant prices is expected to rise to Rs 201.90 lakh crore in 2025-26 from a provisional Rs 187.97 lakh crore a year earlier. Nominal GDP is projected at Rs 357.14 lakh crore, up from Rs 330.68 lakh crore, implying an 8 per cent increase. This is lower than the 10.1 per cent nominal growth assumed in the Union Budget presented in February last year. In dollar terms, GDP is estimated at about USD 3.97 trillion, using an exchange rate of Rs 90 to the dollar.
Sectoral data point to broad-based momentum. Gross value added is seen growing by 7.3 per cent, compared with 6.4 per cent last year. Manufacturing output is expected to rise by 7 per cent, a sharp improvement from 4.5 per cent in 2024-25. Services growth is estimated at 9.1 per cent, up from 7.2 per cent, while agriculture and allied activities are projected to grow by 3.1 per cent, slower than the 4.6 per cent recorded previously. On the demand side, real private final consumption expenditure is forecast to grow by 7 per cent. Gross fixed capital formation is estimated to increase by 7.8 per cent, compared with 7.1 per cent last year, reflecting continued investment.
Global institutions remain more cautious. The International Monetary Fund last month projected India’s growth at 6.6 per cent in fiscal 2026, easing to 6.2 per cent the following year, assuming delays in a US-India trade agreement. The World Bank expects China to grow at 4.9 per cent in 2025 and 4.4 per cent in 2026.
Economists said the domestic outlook remains steady. Rahul Agrawal of ICRA said fiscal slippage beyond the 4.4 per cent of GDP target is unlikely due to stronger non-tax revenues and potential expenditure savings. Dharmakirti Joshi, chief economist at Crisil, said growth this year would be nearly 100 basis points higher than anticipated at the start of the fiscal, citing supportive policies and favourable conditions such as above-normal monsoons and low crude prices. Jahnavi Prabhakar, economist at Bank of Baroda, noted that festive demand and improving activity levels continue to underpin resilience. She said strong sales during festivals, along with GST rationalisation and income tax cuts, are expected to lift consumption, with post-festive demand also holding up. The First Advance Estimates form the basis for the Union Budget, scheduled to be presented on February 1.