Economists see India's GDP growth strong in real terms, but low inflation narrows nominal expansion

Real GDP is estimated to attain a level of Rs 201.90 lakh crore in FY26, against the Provisional Estimates (PE) of GDP for FY25 of Rs 187.97 lakh crore, it said.

Further, the data said the Nominal GDP is estimated to grow at 8% in FY 2025-26.

Speaking on the estimates, Dharmakirti Joshi, Chief Economist, Crisil said, "The 60 basis point gap between nominal and real GDP this fiscal will be the lowest since 2011-12."

"India's growth momentum has sustained despite elevated global uncertainty due to tariff tensions, riding on accommodative monetary and fiscal policies, robust corporate balance sheets, and favourable developments such as above-normal monsoons and low crude oil prices. Fixed investments is the primary driver this fiscal, with growth picking up to 7.8% vs 7.1%. Private consumption growth has held up at 7% -- above the trend but a tad slower than the previous fiscal," he said.

"Next fiscal, we expect the nominal and real growth to flip - nominal growth is expected to rise to close to its long-term average at 10.5-11% and real growth to be at 6.7%," he added.

"While the scope for further policy rate cuts will be limited, transmission of previously announced cuts will continue to support the economy next fiscal. The effects of monetary policy typically operate with a lag. We expect the government to maintain capital expenditure growth at a moderate pace in the forthcoming budget."

"Of late, the government has been advancing domestic reforms, including deregulation, to improve the business climate and enhance the economy's long-term growth potential. These measures could have a positive impact on private investments, which are beginning to show some signs of improvement," Joshi said.

DK Srivastava, Chief Policy Advisor, EY India said First Advance Estimates for 2025-26 indicate a narrowing of the difference between nominal and real GDP growth rates which are estimated at 8.0% and 7.4% respectively. Real growth remains fairly impressive.

"This growth is clearly led by growth in investment of 7.8% which exceeds private final consumption expenditure growth of 7%. On the output side, services growth with its three main segments of trade, transport et al., financial and real estate, and public administration, growing at 7.5%, 9.9% and 9.9% respectively, thereby outperforming the growth of manufacturing which remain healthy at 7.0%. Agricultural growth at 3.1% is lower than the average of the last four years which is 4.5%," Srivastava said.

"The unexpectedly low implicit price deflator-based inflation at 0.5%, leading to a nominal GDP growth of 8% has significant implications for the revised estimates of the 2025-26 budget aggregates. In particular, the budget estimates for this year had assumed a nominal GDP growth of 10.1%. Although this does not affect the magnitude of fiscal deficit which at 4.4% of nominal GDP was budgeted at Rs 15.7 lakh crore."

Dr. Manoranjan Sharma, Chief Economist, Infomerics Ratings said, "This momentum is underpinned by several structural drivers: sustained public capital expenditure across infrastructure, transport, and energy; resilient domestic consumption, particularly in urban markets; an improving investment cycle supported by corporate deleveraging; continued strength in services--notably IT, finance, and tourism; and overall macroeconomic stability, reflected in contained inflation and a manageable fiscal deficit. While these forces are tangible, their durability and alignment cannot be taken for granted."

Growth remains supported by public investment-led expansion, the continued dominance of the services sector, and India's favourable demographics combined with a large domestic market, which together provide resilience to demand and output, he said.

However, risks persist from elevated global economic uncertainty, still-cautious private investment sentiment, vulnerability in agriculture due to weather dependence, and potential inflationary pressures that could limit monetary policy flexibility, he highlighted. (ANI)