Overview
- Government first advance estimates put real GDP growth at 7.4% for FY26 with nominal growth at 8%, indicating the economy is on track to exceed $4 trillion and providing the baseline for the Feb. 1 Union Budget.
- Investment-led momentum is evident as gross fixed capital formation is estimated to rise 7.8%, supported by higher public capital expenditure, while private consumption growth softens slightly to 7%.
- Manufacturing output is projected to expand about 7% and services roughly 9.1% in FY26, offsetting slower agriculture and a moderation in construction.
- Nominal growth falls short of the budget’s 10.1% assumption, though the NSO’s projected nominal GDP level roughly aligns with budget calculations, easing concerns about fiscal deficit targets.
- Goldman Sachs expects FY27 growth to moderate to 6.8% with firmer consumption but slower broad-based private capex due to trade uncertainty and elevated US tariffs, and it sees limited room for further RBI rate cuts with inflation near 4%.