India’s GDP Growth Seen Rising to 7.4% in FY26 on Services Strength

India’s real GDP growth is projected to accelerate to 7.4 per cent in FY 2025–26, up from 6.5 per cent in the previous financial year, according to the advanced estimates released by the Ministry of Statistics and Programme Implementation. The outlook underscores the economy’s resilience amid global uncertainties, with the services sector expected to be the primary growth engine.

Official estimates indicate that financial services, real estate, professional services and public administration will lead the expansion, registering a robust growth of 9.9 per cent at constant prices in FY26. Other service segments such as trade, hotels, transport, communication and broadcasting-related activities are projected to grow by 7.5 per cent, reflecting sustained domestic demand and improving economic activity.

The secondary sector is expected to maintain steady momentum. Manufacturing and construction are both projected to expand by 7 per cent, supported by higher investment and infrastructure spending. Agriculture and allied activities, while comparatively moderate, are estimated to grow by 3.1 per cent during the year.

On the demand side, Real Private Final Consumption Expenditure (PFCE) is forecast to rise by 7 per cent in FY26. This growth is expected to be aided by income tax exemptions announced in the Union Budget and GST rate reductions across several goods and services, which are likely to boost household spending. Gross Fixed Capital Formation (GFCF), a key measure of investment activity, is projected to grow by 7.8 per cent, higher than the 7.1 per cent recorded in FY25.

Recent quarterly data point to strong momentum. Real GDP growth surged to 8.2 per cent in the second quarter of FY26, compared to 5.6 per cent a year earlier, driven by strong performances in manufacturing and services. The first half of FY26 recorded an average growth of 8 per cent.

Despite global headwinds, including trade disruptions and tariff hikes by the US, India remains the world’s fastest-growing major economy. The International Monetary Fund has also projected India as the only major economy likely to grow above 6 per cent in FY26.