India’s GDP growth is expected to be 7.4% in 2025-26, the National Statistics Office (NSO) said in its first advance estimates released on Wednesday. This is pretty much on expected lines given RBI’s forecast of 7.3% growth in its December 2025 monetary policy resolution. To be sure, we still have almost a quarter left before the fiscal year gets over on March 31.
The only reason the first advance estimates are keenly watched by observers and, perhaps, even the government, is that they are the last GDP data released before the presentation of the Union Budget for the next fiscal year. The suspense was greater this time because nominal GDP growth was expected to be underwhelming given the subdued inflation through most of the ongoing fiscal year. NSO’s latest data expects nominal GDP growth for 2025-26 at 8%, which is significantly lower than the 10.1% assumed in the 2025-26 Budget.
Nominal GDP serves as the base for revenue projections, and a significant shortfall in its value can lead to revenue shortfalls, thereby causing problems for overall budgetary math including the fiscal deficit. The good news from the latest GDP numbers, as far as the budget is concerned, is that, despite a large shortfall in nominal GDP growth rate, the absolute value of nominal GDP is marginally higher than what was assumed in the 2025-26 Budget. This means that there is no reason to suspect a major slippage as far as the fiscal calculus of the budget is concerned.
Having flagged the most important takeaway from the latest GDP numbers, is there anything else to be said? As inflation inches upwards — which is not necessarily a bad thing — we should see a revival in nominal growth rate and, perhaps, a moderation in real growth rate because of indexation-related issues. To be sure, given the GDP base revision on the cards, the changes in future GDP data and growth rate could be much larger than just inflation driven.
These statistical and fiscal calculations aside, the key macroeconomic challenge remains what it has been throughout the year. India’s economy continues to face a turbulent external environment, is using its domestic momentum to maintain resilience, and will have to pump-prime both the domestic and external to boost future growth on a sustainable basis. Macroeconomic stability, reforms, and, given the times, diplomacy too, must work in tandem to achieve this goal.