AA Edit | India, Despite 7.4% Forecast In GDP, Still Can't Let Guard Down

The financial year 2025-26 has been one of the most volatile years for the world when armed conflicts and protectionism became a global norm rather than an exception, heightening global uncertainty and adversely affecting emerging economies. India, however, has been a pleasant exception which, as advance estimates suggest, is poised to record better-than-expected economic growth.

According to the First Advance Estimates of Gross Domestic Product released by the National Statistics Office, India’s real GDP growth is projected at 7.4 per cent in the financial year 2025-26, compared to the 6.5 per cent growth recorded in FY 2024-25. Nominal GDP is estimated to grow by eight per cent, taking the overall economic size to Rs 357.14 lakh crore ($3.97 trillion), indicating sustained income expansion despite currency pressures and capital outflows.

This financial year has not been kind to emerging economies. US President Donald Trump’s unjust and unilateral tariffs played a major role in disturbing global economic stability. He imposed an unprecedented 50 per cent tariff on Indian goods due to the country’s continued purchase of Russian crude oil, affecting several export-related sectors. Simultaneously, the rupee has remained under pressure due to global dollar strength, while foreign institutional investors have continued to pare exposure to Indian markets.

Nevertheless, Gross Value Added (GVA) is estimated to grow by 7.3 per cent in FY 2025-26, compared to 6.4 per cent in the previous year, demonstrating the country’s ability to decouple domestic momentum from external shocks. This growth has been driven primarily by the services sector, which continues to act as the backbone of India’s growth model. Financial, real estate and professional services, along with public administration, defence and other services, are estimated to grow by 9.9 per cent in real terms. Trade, hotels, transport and communication services are expected to grow by 7.5 per cent, highlighting the revival of mobility, tourism and logistics activity.

On the demand side, Private Final Consumption Expenditure is estimated to grow by seven per cent in real terms, broadly in line with last year’s performance. This suggests that household spending has remained resilient despite inflationary pressures and global uncertainty. Government consumption also rebounded by 5.2 per cent, despite fiscal tightening being visible across many major economies.

Gross Fixed Capital Formation is expected to show better-than-expected growth at 7.8 per cent, higher than the 7.1 per cent growth posted in FY 2024-25, aided by continued public infrastructure spending and improved private sector confidence.

Manufacturing and construction are expected to grow by seven per cent, signalling steady industrial activity despite global supply-chain disruptions and trade frictions. Agriculture and allied activities have registered moderate growth of 3.1 per cent, while mining has shown some contraction.

Though the advance estimates tell a story of India’s resilience, the government and industry cannot afford to let their guard down. The world is on the cusp of a major transformation, comparable to a moment like Bretton Woods, and what India does in the next few years will determine its trajectory for the coming decades.