India's economy is projected to grow at 7.4% in the fiscal year 2025-26, according to the first advance estimates released by the Ministry of Statistics and Programme Implementation (MoSPI). This represents a significant increase from the 6.5% expansion recorded in FY2024-25. The government's initial projection was between 6.3% and 6.8%. The robust growth is attributed to the strong performance of the manufacturing and services sectors.

In nominal terms, which factors in inflation, the GDP is estimated to grow at 8.0% in FY26. This is lower than the 10.1% estimated in the annual federal budget announced last February.

The services sector is identified as a key driver, with real Gross Value Added (GVA) projected to rise by 7.3%. Within the services sector, significant growth is expected in financial, real estate, and professional services, as well as in public administration and defense. These areas are predicted to grow at a combined rate of 9.9%. Trade, hotels, transport, communication, and broadcasting-related services are expected to grow by 7.5%, indicating a continued recovery in these areas.

The manufacturing and construction sectors are estimated to achieve a growth rate of 7%. However, the agriculture and allied sectors are expected to see moderate growth at 3.1%. Similarly, the electricity, gas, water supply, and other utility services sectors are projected to experience slower growth, at 2.1%.

These advance estimates will be used by the government to form the basis for key calculations in the Union Budget 2026-27, which is expected to be presented on February 1. These calculations include fiscal deficit, spending, and debt ratios.

Private consumption, which accounts for approximately 60% of India's GDP, is projected to expand by 7% year-on-year, which is slightly less than the 7.2% expansion in the previous fiscal year. Government spending is estimated to increase by 5.2%, up from 2.3% in the previous year, while private investment is expected to rise by 7.8%, compared to 7.1% growth the year before.

The first advance estimates are compiled using the benchmark-indicator method, extrapolating FY25 data with sector-specific indicators. Data sources include the Index of Industrial Production (IIP), financial results of listed companies, agricultural and livestock production estimates, and data on coal, petroleum, cement, steel, transport, aviation, port traffic, GST collections, bank credit, and insurance premiums.

While the government forecasts a 7.4% growth, other institutions also provide their estimates. For example, Morgan Stanley has revised India's GDP growth forecast to 6.7% for FY26, citing strong numbers from the April-June quarter and anticipating that upcoming Goods and Services Tax (GST) cuts will further boost domestic demand. An Informist poll of 11 economists predicted India's GDP to grow by 7.5%.

The second advance estimates, incorporating additional data and revisions, are scheduled to be released on February 27, 2026.