GDP to grow at 7.4% in 2025-26, government predicts in first advance estimates for the year

The National Statistics Office (NSO) of India, under the Ministry of Statistics & Programme Implementation (MoSPI), has released the First Advance Estimates for fiscal year (FY) 2025–26, projecting real GDP growth of 7.4% (up from 6.5% in FY2024–25). Nominal GDP is estimated to rise by about 8.0%. These figures form the statistical baseline that the government—and markets—use when framing the Union Budget and near-term policy.

1) So what are these things called First Advance Estimates. How do we deal with First Advance Estimates?

The government does something called “Advance estimates” which’s like a first guess at how well the countrys economy did. They make these guesses before they have all the information for the year. The National Statistical Office makes these guesses in steps. First they make the First Advance Estimates using some of the information they have like records from the government and some early survey results. They also look at how the economy has been doing far. On they update these guesses with the Second Advance Estimates and finally the Final Estimates when they have more complete information and they have had a chance to revise the numbers for each quarter. The “Advance estimates” are important because they give us an idea of how the economy’s doing. The National Statistical Office uses the “Advance estimates” to help them make guesses, about the economy. In short: First AEs are useful early signals, not final verdicts; they guide policy (notably the Budget) but are subject to revision.

The government and markets care about the Annual Estimates because the Annual Estimates are important for making plans, including how much money the government will get and how much it will spend. The Annual Estimates also help people understand what might happen in the markets. Additionally the Annual Estimates are a reference point that the Finance Ministry, Reserve Bank of India and other international organizations use to see how well the country is doing in the term. The Annual Estimates are used by the Finance Ministry and the Reserve Bank of India to make decisions. The Annual Estimates are also important, for the organizations that watch the countrys financial situation.

2) The figures, in the headline. This is what the release actually says in a short form

From the NSO/MoSPI press note:

Real GDP growth (FY2025–26): 7.4% (vs 6.5% in FY2024–25).

The growth of the Gross Domestic Product for the financial year 2025 to 2026 is about 8.0 percent. This means that the difference between the Gross Domestic Product growth and the real Gross Domestic Product growth is not very big. In words the nominal Gross Domestic Product growth and the real Gross Domestic Product growth are pretty close which means that the inflation rate is not very high for the financial year 2025 to 2026. The nominal Gross Domestic Product growth is an indicator of the overall health of the economy and the modest gap between the nominal Gross Domestic Product growth and the real Gross Domestic Product growth is a positive sign for the financial year 2025, to 2026.

The growth of the Gross Value Added is expected to be around 7.3 percent. This is mainly because the services sector is doing well. The Gross Value Added growth is looking good. The services are a big part of this.

Key components: Private final consumption, fixed investment (GFCF), government consumption and external demand show mixed contributions—GFCF (a proxy for investment) is estimated to grow solidly.

(These are the official, short-form numbers the press picked up and repeated widely.)

3) What parts of the economy are driving the 7.4 percent growth. We want to know which sectors are really making the economy grow at this rate of 7.4 percent. The economy is. We see that it is growing at 7.4 percent so which parts are actually powering this 7.4 percent growth.

The release and the follow-up reporting show us some things, about certain sectors. The release and the follow-up reporting point out a few features of these sectors.

Services: The services sector is the major engine. “Buoyant growth in services” is central to the faster GVA—services include IT and business services, trade, hotels & restaurants, transport and communications, financial services, and public administration. Services have been consistently outpacing other sectors in recent quarters and their strong performance is a big reason the headline number looks healthy.

Manufacturing and construction (secondary sector): Manufacturing is estimated to remain robust—MoSPI puts manufacturing growth at roughly the mid-single digits (the First AEs often show manufacturing around ~7% in this cycle), with construction and allied activities also contributing, albeit with some moderation compared to the prior year. Investment-intensive sectors (machinery, construction) support gross fixed capital formation (GFCF).

Agriculture: Agricultural growth is more muted in the AEs (often reflecting variability in output, weather, and commodity prices). Agriculture typically accounts for a large share of employment but a smaller share of GVA; therefore, slower farm growth has a limited drag on headline GDP but matters for rural incomes and consumption patterns.

4) Expenditure-side picture: consumption, investment, government spending, and net exports

The Annual Expenditure includes things that we spend money on:

Private final consumption expenditure is going to get bigger. People buying things in their country is still the main reason why the economy is growing. Private final consumption expenditure is very important, for the economy.

Gross fixed capital formation (GFCF): A key positive—investment is estimated to expand at a healthy pace (GFCF estimated growth ~7.8% in some reporting), reflecting capex by both the public sector (infrastructure) and private firms upgrading capacity. This is important because sustained investment raises potential growth.

Government final consumption: supportive but smaller in size compared to PFCE and GFCF.

Net exports: geopolitics and trade measures (notably U.S. tariffs) complicate the exports picture; exports have shown resilience but headwinds remain. Several analysts note that despite tariffs, exports have not collapsed—exports and external demand are a mixed contribution in these estimates.

5) Drivers behind the stronger reading (why 7.4% now)

The people who study this stuff and the government say there are some reasons that are close, by:

Services momentum: Strong domestic and global demand for services (IT, software, financial, professional services) has lifted GVA. Higher value-added services produce large GDP gains relative to employment.

Capex cycle and public investment: Government infrastructure spending and private capex (machinery, manufacturing lines, industrial real estate) have been elevated, supporting GFCF. Policy support—favourable credit conditions, targeted incentives for manufacturing/exports, and public investment pipelines—has helped.

Consumption resilience: Private consumption has remained reasonably firm—household demand has been supported by employment gains in formal sectors, rising incomes in urban areas, and a still-benign inflation environment that supports real incomes.

Base effects and quarterly mix: Some recent quarters (e.g., strong Q1 and Q2 starts) lift the annual AE—early-year strength shows up in First AEs. Base effects relative to slower quarters last year can make the growth rate look higher.

6) The international context and alternative forecasts

It is important to compare the NSO number with what independent forecastersre saying about the NSO number. We should look at what the NSO number’s and then see what the independent forecasters think about the NSO number. This will help us understand the NSO number better.

IMF: The IMF’s country page and recent WEO updates have India’s projected growth below 7.4% (IMF showing projections in the mid-6s for 2026 in recent updates). That means the NSO’s AE is more optimistic than IMF staff projections.

OECD: The OECD in its Economic Outlook had forecasts in the high-6s (around 6.7% for FY2025–26), and explicitly warned that U.S. tariffs could shave growth via lower exports; it estimated a modest negative hit. That puts the NSO’s 7.4% above many multilateral agency forecasts.

Private banks & think tanks: Domestic institutions (HDFC, other banks) and market analysts broadly welcomed the AE as showing stronger momentum, though many emphasised the caveat that these are early estimates.

Takeaway: the government’s AE is one plausible official estimate; international agencies are somewhat more conservative—differences reflect data vintage, methodology and judgement about trade headwinds and domestic momentum.

7) Now let us think about the risks and the downside of things what could really mess up the idea of getting to that 7.4% path. We have to consider what could go wrong with the 7.4% path. The 7.4% path has some risks that we need to think about.

The Annual Estimate is based on a few ideas and there are some potential problems that could happen such, as:

Trade & geopolitical shocks (e.g., U.S. tariffs): In late 2025 the U.S. imposed high tariffs on certain Indian imports tied to geopolitical measures—analysts and the OECD warned these could dent export growth and manufacturing competitiveness. If exports slow more than expected, headline GDP can be hit.

Global slowdown / demand weakness: A broader global slowdown (advanced economies) would reduce external demand for Indian goods and services, impacting manufacturing and some services exports.

Monsoon and agriculture shocks: A poor monsoon or crop distress can reduce rural incomes and dampen consumption in large swathes of the country; agriculture still matters for consumption patterns even if it is a smaller share of GVA.

Inflation and monetary policy: If inflation picks up faster than expected, the RBI may tighten (raising rates), which could slow investment and consumption—especially interest-sensitive sectors like housing and autos. The AE implies only modest nominal-real gaps, but surprises are possible.

Data revisions / measurement uncertainty: By definition, First AEs are incomplete. Later revisions (Second AE, Quarterly revisions) can meaningfully change the pace. The NSO will revise estimates as more complete data arrive.

8) Things that could make this situation better than we think which is why the growth might be more, than what we expect and that is because of the upside possibilities and these upside possibilities are what make us think that the growth could surprise to the upside.

On the hand there are also good things that can happen:

Faster private investment: If firms accelerate capex (especially in manufacturing and green/electronics value chains), GFCF could beat expectations and push growth higher.

GST reform and administrative boosts: Structural reforms—e.g., tax administration reforms or GST rationalisations—can lift business activity if they reduce frictions or broaden the tax base. The OECD even suggested some reforms could add modest tenths of a percent to growth.

Services export strength: If global demand for Indian IT and business services holds up, services exports could surprise on the upside, supporting both real and nominal GDP.

9) Policy implications — for the Budget, RBI, and investors

For the Union Budget (Feb 1, 2026 context): The AE provides the statistical backdrop to finalise revenue estimates and spending plans. A stronger growth baseline can make fiscal consolidation easier (higher tax buoyancy) or justify targeted spending on infrastructure and social programmes. However, governments must be cautious about relying on early estimates—budget forecasts often use conservative assumptions to avoid mid-year slippages.

Monetary policy (RBI): The RBI will weigh growth vs. inflation. A 7.4% growth print with subdued inflation could give room for an accommodative stance, but upside inflation risks or external shocks may push for caution. Markets watch the interplay between fiscal expansion (if any) and monetary policy.

Investment & markets: Investors tend to respond positively to stronger growth estimates—equities, capital goods, and banks often gain as loan demand and corporate earnings outlook improve. However, attention turns to data revisions and the durability of the cycle.

10) How reliable are AEs historically? (lessons from past revisions)

Advance Estimates have sometimes been revised materially when the final data come in—especially when there are surprises in crop output, government spending patterns, or corporate earnings. The lesson for analysts: treat AEs as probabilistic signals—very useful, but not immutable truth. Subsequent Second AEs (and quarterly national accounts) give progressively firmer numbers. The NSO’s methodology is robust, but limited by data availability early in the fiscal year.

11) Putting the number in historical and global perspective

Historical: A 7.4% growth rate places India among the faster-growing major economies — notably higher than global averages (which have hovered around ~3% in recent years). Over the last decade, India’s growth has fluctuated: high rates in the pre-pandemic period, a pandemic dip, and recovery since. A 7.4% read is comfortably above trend and consistent with the narrative of an investment and services-led recovery.

Global ranking: At these rates India is often described as one of the world’s fastest growing large economies; multilateral agencies have tended to put India at or near the top of major economies in growth rankings, although their point forecasts are usually a bit more conservative than current AE.

12) What to watch next — the data calendar and indicators

Second Advance Estimates (when published): MoSPI will issue a Second AE (the schedule is noted in the AE release). Those later releases incorporate more complete fiscal and corporate data—watch for material changes. (Analysts flagged February 27 as a key revision date for some series.)

Quarterly GDP releases and surveys: Q3 and Q4 quarterly numbers, corporate results, high-frequency indicators (GST collections, bank credit flows, PMI indices, auto sales, railway freight) will indicate whether the early momentum is holding.

External sector data: Trade numbers and the effects of tariffs will be closely watched—if exports weaken substantially, revisions could show slower growth.

13) A fair decision. The reason why 7.4 percent’s possible but not certain. This is because the number 7.4 percent is believable. However the number 7.4 percent is not a thing. The number 7.4 percent is what we are talking about here.

The First Advance Estimate of 7.4 percent seems reasonable because the services sector is doing well investment numbers are high. People are still spending money like they were at the start of the year. This also fits with the idea that India is going through a period with a lot of investment and the government is helping.. The First Advance Estimate is higher than what some other groups, like the International Monetary Fund and the Organisation for Economic Co-operation and Development are saying. They think there might be problems with trade and they are being more careful with their guesses. So the First Advance Estimate should be seen as a plan from the government not something that will definitely happen. The First Advance Estimate is what we should look at. It is, about the First Advance Estimate that we are talking. Future updates will either confirm that optimism or temper it.

14) Frequently Asked Questions that people often want to know about the Quick FAQ

So people are saying that Indias economy is growing at a rate of 7.4 percent.. Does that really mean things are getting better for everyone in India? Is the economy really booming for all the people who live there? Indias economy is a deal and a lot of people are talking about how it is doing.. The question is, does this growth mean good things for everyone, in India or just some people?

A: Not necessarily. Aggregate GDP growth does not capture distribution; some regions, sectors and households benefit more (urban services, formal manufacturing) while others (small farmers, informal workers) may see less of the gain. Employment quality, wages, and regional spread matter for inclusive growth.

So the question is, will this make India the growing big economy automatically. This is a big deal for India and its economy. India is an economy and it is growing. The question is, will this thing that is happening make India the growing big economy. It is not that simple. India is a country with a lot of people and a lot of things going on. The economy of India is. That is good, for India.. Will this one thing make India the fastest growing big economy that is the question. India and its economy are very important. The economy of India is something that a lot of people care about. So will this make India the growing big economy we have to think about India and its economy.

A: It places India among the leaders for that year, but international comparisons depend on how other economies perform and the forecasting vintage. Multilateral agency numbers (IMF/OECD) are marginally lower; the NSO’s AE is on the higher side.

Are the numbers we are looking at taking into account the inflation that is happening?

A: The AE gives both nominal and real growth—the nominal rise of ~8% implies moderate inflation assumptions built into the calculation. If inflation spikes, nominal numbers will change but real growth could be weaker.

15) Concluding synthesis

The first estimate for the economy is looking good. It says the economy will grow by 7.4% in the year 2025-2026. This is a sign. It shows that services are doing well people are investing again and people are still spending money. This gives the government an idea of how the economy is doing when they make the Budget. It also shows that the economy is getting better and some parts are doing well.. We should be careful because this is just an early estimate. Many other groups think the economy will not do well. So we need to be prudent with the First Advance Estimates, for the economy. The First Advance Estimates are important. We should consider them carefully when thinking about the economy and the First Advance Estimates. Key risks—particularly trade disruptions from tariffs, global demand weakness, and weather-linked agricultural shocks—could reduce the pace, while stronger-than-expected private capex and continued services momentum could lift it further. In short: 7.4% is plausible and encouraging, but keep your eye on the next estimates and high-frequency data to judge whether this looks like a durable upswing or a provisional peak.