India GDP Growth 2026: NSO Estimates 7.4% Real GDP Surge

“India’s Reform Express”: GDP Growth Surges to 7.4% in FY26

On January 7, 2026, the National Statistics Office (NSO) released the First Advance Estimates (FAE) for the financial year 2025–26. The data shows a significant acceleration in the Indian economy, with Real GDP growth pegged at 7.4%, surpassing the 6.5% growth recorded in FY25.

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Prime Minister Narendra Modi hailed these figures, stating that “India’s Reform Express” continues to gain momentum through a combination of aggressive investment and demand-led policies.

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1. Key Economic Indicators (FY 2025–26)

Note: The narrow gap (60 basis points) between Real and Nominal GDP reflects an era of exceptionally low inflation in 2025–26, marking a sharp disinflationary phase in the Indian economy.

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2. Sectoral Performance: Drivers of Growth

The services sector remains the engine of the Indian economy, while manufacturing shows a strong rebound despite global trade tensions.

• Tertiary (Services) Sector: Leads with a robust 9.1% growth. Specifically, financial, real estate, and professional services are estimated to grow by 9.9%.

• Secondary (Industrial) Sector: Projected to grow by 7.0%. Manufacturing saw a sharp recovery to 7.0% from just 4.5% in the previous year.

• Primary (Agriculture) Sector: Growth has moderated to 3.1% (down from 4.6% in FY25), partly due to base effects and shifting weather patterns.

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3. Why These Estimates Matter

The First Advance Estimates are the most critical data points used by the Finance Ministry to draft the Union Budget, scheduled for release on February 1, 2026.

1. Fiscal Deficit: Despite lower nominal growth, the absolute GDP value of ₹357.14 lakh crore is slightly higher than what was assumed in the previous budget. This ensures the government remains on track to hit its 4.4% fiscal deficit target.

2. Investment Surge: The increase in Gross Fixed Capital Formation (GFCF) to 7.8% indicates that the “investment-led” growth model is yielding results.

3. Consumption Stability: Private consumption (PFCE) remains steady at 7%, supported by recent GST rationalization and income tax cuts.

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