India's FY26 GDP First Advance Estimates Show 7.4% Real Growth, Services Sector Leads

India’s first advance estimates of gross domestic product (GDP), a crucial step towards framing the Union Budget, peg real GDP growth at 7.4% for FY26, up from 6.5% in FY25. This growth is largely driven by the services sector, which has shown remarkable resilience and buoyancy.

The momentum in the economy is reflected in the real gross value added (GVA) growth, which is expected to rise to 7.3% in FY26, compared to 6.4% in the previous fiscal year. This indicates a steady improvement in economic activities across various sectors.

On the nominal side, GDP growth for FY26 is estimated at 8%, which is lower than the 9.8% recorded in FY25 and slightly below the CNBC-TV18 poll estimate of 8.3%. Despite this, the overall economic outlook remains positive, with several sectors showing promising growth.

Sector-wise, manufacturing growth is anticipated to accelerate to 7% from 4.5% in the previous year, signaling a recovery in industrial activities. Agriculture, however, is estimated to grow at a slower pace of 3.1%, down from 4.6% in FY25. The mining sector is projected to experience a contraction of 0.7%, a significant shift from the 2.7% growth seen last year. Electricity growth is also expected to slow down to 2.1%.

Construction growth is estimated to be at 7%, a modest decline from the 9.4% recorded in the previous year. Trade, hotels, and transport services are expected to grow by 7.5%, reflecting a steady recovery in these sectors. Financial services, real estate, and professional services are projected to expand by 9.9%, matching the growth seen in public administration, defence, and other services. This underscores the continued strength of the services-led recovery.

On the expenditure side, private final consumption expenditure (PFCE) growth is estimated at 7% for FY26, marginally lower than the 7.2% recorded in the previous year. This indicates steady but moderated household demand. Government final consumption expenditure (GFCE) is expected to grow by 5.2%, a significant increase from the 2.3% growth in FY25, reflecting increased public spending support.

Gross fixed capital formation, a key indicator of investment activity, is projected to rise by 7.8%, up from 7.1% in the previous year. This suggests continued traction in capital expenditure. Exports growth is estimated at 6.4%, broadly in line with the 6.3% expansion seen in the previous year.

From an output perspective, industries are estimated to grow by 6.2% in FY26, compared to 5.9% in FY25, supported by improved manufacturing performance despite weakness in mining and electricity. Services remain the primary growth engine, with growth estimated at 9.1%, up from 7.2% last year.

According to Dharmakirti Joshi, Chief Economist at Crisil, India’s growth momentum has been sustained by accommodative monetary and fiscal policies, robust corporate balance sheets, and favourable developments such as above-normal monsoons and low crude oil prices. While the scope for further policy rate cuts may be limited, the transmission of previously announced cuts will continue to support the economy in the next fiscal year. The government is expected to maintain capital expenditure growth at a moderate pace in the forthcoming budget.

The National Statistical Office (NSO) is set to release a revised GDP series with a new base year of 2022-23 in February, which will replace the current 2011-12 series. This revision may impact the level and growth of GDP due to more updated data and methodological improvements.