India’s economic growth trajectory for FY26 appears steady, with the first advance estimates placing real GDP growth at 7.4%, up from 6.5% in FY25. Gross
value added is estimated to grow 7.3%, supported by services, manufacturing and a recovery in investment activity.
However, nominal GDP growth has been pegged at 8%, a sharp slowdown from 9.8% last year. Economists say this widening gap between real and nominal growth is central to understanding the broader macro, fiscal and market implications of the data.
SBI: Growth looks reasonable, base year revisions could lift numbers
In a research note, SBI said the FY26 GDP estimate appears “expected and reasonable,” noting that the historical gap between the Reserve Bank of India’s projections and National Statistical Office estimates typically remains within a narrow 20–30 basis point range. SBI expects GDP growth to trend closer to 7.5%, with an upward bias.
Crucially, the report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI highlighted that the growth is likely to look stronger once the new GDP base year is released. The second advance estimates, scheduled for February 27, 2026, along with the base revision to 2022–23, could lead to upward revisions in the growth numbers.
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On the expenditure side, SBI report highlighted a pickup in government consumption, which grew 5.2% in real terms, alongside steady export growth of 6.4%. Private consumption growth moderated slightly to 7%, likely reflecting weaker agricultural output, while per capita consumption expenditure rose 6.1%.
National per capita income to rise, signalling resilience in demand
One of the more reassuring signals in the data is the improvement in household income. SBI estimates per capita national income will rise by ₹16,025 to ₹2,47,487 in FY26, reflecting the broader resilience in demand despite global and domestic headwinds.
Capital formation, which slowed last year, also showed signs of recovery, with real growth rising to 7.8%. Nominal capital formation growth improved as well, pointing to a revival in investment momentum.
Services remain the dominant growth engine, estimated to expand 9.1% in FY26, compared with 7.2% last year. Manufacturing growth of 7% underpins overall industry growth of 6%, even as mining activity is expected to slow.
HDFC Bank: Softer nominal growth reflects timing, inflation and base effects
HDFC Bank, while broadly aligned with the constructive growth narrative, focused on the timing and composition of expansion. It estimates GDP growth in the second half of FY26 at 6.9%, lower than 8% in the first half, driven by base effects, seasonal factors and relatively slower government spending to meet fiscal targets.
According to Sakshi Gupta, Principal Economist, HDFC Bank, lower inflation has also weighed on nominal growth. The bank estimates nominal GDP growth at 7.3% in H2FY26, compared with 8.8% in H1. Gupta noted that the first advance estimates are based on data available only till November and are likely to undergo revisions as more information becomes available.
Also Read: Budget flexibility hinges on nominal growth this year, economists caution
Fiscal maths manageable, but less comfortable
On fiscal arithmetic, Gupta said while absolute nominal GDP levels broadly align with Budget assumptions, the moderation in nominal growth — combined with income tax and GST cuts — could result in a revenue shortfall of ₹1.5–2 lakh crore.
That said, the bank expects expenditure rationalisation and a higher dividend transfer from the Reserve Bank of India to help the Centre meet its fiscal deficit target of 4.4% of GDP for FY26.
Looking ahead: Growth cools, nominal momentum returns
HDFC Bank expects GDP growth to moderate to 6.7–6.9% in FY27, largely due to base effects and a rising GDP deflator. Encouragingly, nominal growth — a key metric for credit and earnings — is projected to rebound to around 10%.
Risks to the outlook remain, including global protectionist policies, geopolitical tensions and external demand pressures, particularly from higher tariffs on India’s exports. Still, economists agree that FY26 growth passes the immediate stress test, with revisions, income gains and investment recovery shaping the next phase of the story.
