In accordance with the First Advanced Estimates, India is likely to see a GDP Growth of 7.4% during FY 2025 – 26. On 7th January 2026 the first Advance Estimates were released by the government of India regarding the GDP projection of India for the year FY 2025-26, which will be 7.4% of India’s GDP growth. This clearly exceeds a 6.5% growth last year and reaffirms India’s position as the fastest-growing major economy in the world.
This data gave us some important insights about sectoral performance, consumer demand, investment trends, and barriers towards what would shape the Union Budget 2026.
| Indicator | Estimate (%) | Comparison (FY25) |
|---|---|---|
| Real GDP Growth | 7.4% | 6.5% |
| Nominal GDP Growth | 8.0% | 9.7% |
| Services Sector GVA | 9.1% | 7.2% |
| Manufacturing GVA | 7.0% | 4.5% |
| Agriculture GVA | 3.1% | 4.6% |
| Fiscal Deficit Target | 4.4% | 4.9% |
Key Growth Drivers Behind India’s 7.4% GDP Forecast
Services Sector Leading Growth
The services sector is the backbone of growth in India, with an expected expansion of around 9.1%. Almost 10% of its performance is driven by strong momentum in banking, financial services, real estates, and professional services, along with the factors of rising demand for credit along with urban consumption.
Consumer Spends Strong Recovery
Strengthened household consumption showed improvement in expenditures on clothing, automobiles, and consumer goods, partially attributable to the entire GST and income tax reductions announced in late 2025 increasing disposable income and boosting demand.
Investment Activity Signals Business Confidence
Gross fixed capital formation, which involves investment in machinery and infrastructure, is expected
to rise by 7.8%. This indicates that medium-term growth prospects are perceived optimistically in businesses, despite global uncertainties.
Annual GDP Growth Rate by Fiscal Year (FY15–FY26)
| Fiscal Year | Growth Rate (%) |
|---|---|
| FY15 | 7.4 |
| FY16 | 8.0 |
| FY17 | 8.2 |
| FY18 | 7.0 |
| FY19 | 6.1 |
| FY20 | 4.2 |
| FY21 | -5.8 |
| FY22 | 9.1 |
| FY23 | 7.2 |
| FY24 | 9.2 |
| FY25 | 6.5 |
| FY26 | 7.4 |
Key Challenges Facing India’s Growth Outlook
Growth in agriculture is set to be 3.1%, which is lower than last year. Weather variability and lesser productivity improvement are issues looming large, especially income growth from rural areas.
Moderation Expected in the Second Half
In the first half of FY 2025-26, GDP growth may be strong at close to 8% before tapering in the second half to approximately 6.8%. The base effects and external pressures explain this slowdown.
Global Trade and Tariff Pressures
India faces ever-increasing global headwinds, including those from the US import duties at 50% on specific Indian exports. These restrictions on trade can in turn affect the manufacturing export scenario and global demand conditions.
Why the First Advance Estimates Matter?
Projection of GDP growth at 7.4% is much more than a mere headline-it will directly impact the planning of fiscal policy, expenditure priorities, and policy decisions for Union Budget going to be held on February 1, 2026. Whereas agriculture and global trade pose challenges, the fundamentals of the Indian economy stand stark.
The First Advance Estimates of India illustrate the capability of the economy to lead into strong growth even with global uncertainties. Services, infrastructure, consumption, and investment are drawing up momentum as the Indian economy charge ahead on its accelerated journey of reform vision. The mechanism does remain in external risk as well, but maintains a firm resilience against sector imbalances. Thus the general outlook is, India appears nicely on its way.
Source – Press note on first advance estimates of gross domestic product for 2025-26.