The Ministry of Statistics and Programme Implementation (MoSPI) on January 7 released the first advance estimates of India’s gross domestic product (GDP) for FY26. The estimates peg real GDP growth at 7.4 percent in FY26, broadly in line with market expectations. Nominal GDP, or GDP measured at current prices, is estimated to grow by 8 percent, rising to Rs357.14 trillion from Rs330.68 trillion in FY25.
Nominal GDP measures the value of all goods and services at prevailing prices. Unlike real GDP, it does not adjust for inflation. In simple terms, it shows how big the economy is in rupee terms, which is the number that matters for taxes, government revenues and deficit calculations.
Real GDP reflects volume growth. Nominal GDP reflects volume plus prices. When the two move close together, it means inflation is contributing very little.
That is exactly what the FY26 estimates show. While real GDP is projected at ₹201.90 trillion at constant 2011-12 prices, nominal GDP is only modestly higher, pointing to weak price pressures across the economy.
The FY26 advance estimates show nominal GDP growth of 8 percent, only marginally higher than real GDP growth of 7.4 percent. This relatively narrow gap suggests that price pressures across the economy have remained subdued.
According to a Crisil’s analysis, the gap between real and nominal GDP growth in FY26 is just 0.6 percentage points, the lowest in the 2011-12 GDP series. The ratings agency attributed this to a sharp moderation in inflation, with the GDP deflator expected to grow by just 0.5 percent in FY26, compared with 3.1 percent in FY25.
Nominal gross value added (GVA), which measures value added by producers before accounting for net taxes, is estimated to grow by 7.7 percent to Rs323.48 trillion. Services continue to dominate the economy in value terms, accounting for more than half of nominal GVA.
While real GDP growth is the indicator of economic strength, nominal GDP plays a more direct role in determining government revenues and fiscal ratios. Most taxes, including income tax, corporate tax and GST, are levied on current prices or incomes and, therefore, move broadly in line with nominal GDP.
Fiscal indicators such as the fiscal deficit, revenue deficit and public debt are expressed as a share of nominal GDP. Slower nominal growth can, therefore, put pressure on these ratios even if spending remains unchanged.
Crisil noted that the softer nominal GDP growth in FY26 could place some strain on deficit targets, as these are measured against nominal GDP. The agency pointed out that nominal growth of 8 percent is not only lower than last year’s 9.8 percent, but also below the long-term average of around 10.5 to 11 percent.
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The Union Budget 2025-26, presented in February 2025, had assumed nominal GDP growth of 10.1 percent. The Budget was framed when FY25 nominal growth was estimated at 9.7 percent and inflation was expected to remain comfortably within the Reserve Bank of India’s tolerance band. Against that backdrop, the FY26 advance estimate of 8 percent falls short.
Radhika Rao, executive director and senior economist at DBS Bank, says the risk to fiscal arithmetic is partly cushioned by a stronger starting point. “Although nominal GDP growth of sub-9 percent is weaker than the budgeted 10.1 percent, the number is closer to the revised estimates for FY25,” she explains. “In effect, the stronger-than-expected nominal GDP base in FY25 reduces the risk that FY26 deficit targets will be missed solely because of slower growth.”
However, fiscal pressures remain. “That said, expenditure compression is likely in FY26 to keep within the deficit target,” Rao adds. “Much attention will be on the nominal pace rather than the real growth rate."
The Union Budget had targeted a fiscal deficit of 4.4 percent estimates for FY25, while earmarking capital expenditure of Rs11.21 trillion, or 3.1 percent of GDP.
Rajani Sinha, chief economist at CareEdge Ratings, says the growth estimates were broadly in line with expectations. “The advance estimate of GDP growth of 7.4 percent for FY26 is very much in line with our expectations,” she says, citing factors such as lower inflation, reduced income tax burden, expected interest rate cuts and strong rural demand.
At the same time, she cautions against external risks. “We need to be wary of the heightened global uncertainties and trade barriers imposed by the US and the impact of that on our exports and capital flows,” Sinha says.
Even so, she believes the government can broadly meet its fiscal targets. “Even with nominal GDP growth estimated at a low of 8 percent in FY26, we feel the government will manage to broadly meet the fiscal deficit to GDP target of 4.4 percent,” Sinha says. She points to support from higher dividend transfers by the Reserve Bank and restrained revenue expenditure so far, alongside a strong push on capital spending.
Sinha also flagged implications for monetary policy. With growth remaining resilient, she expects the Monetary Policy Committee (MPC) to turn cautious. “With GDP growth remaining healthy, we feel that the MPC is unlikely to cut rates further in the next meeting,” she says, adding that policymakers are likely to pause amid global uncertainty and preserve room for future action if growth weakens.
As with all advance estimates, the FY26 GDP numbers are based on partial data and indicator-led projections and are subject to revision as more comprehensive information becomes available.
First Published: Jan 08, 2026, 18:14
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