In the Union Budget 2026, Finance Minister Nirmala Sitharaman projected a nominal GDP growth of 10% to 10.5% for India in the financial year 2026-27. Sitharaman defended the projection, deeming it a realistic target based on the current GDP base year and methodology. India's GDP is estimated at ₹393 lakh crore. The government is also planning to revise the base years for key economic indicators like GDP and CPI.
The projection comes after the first advance estimates by the National Statistical Office (NSO) indicated a robust real GDP growth of 7.4% in FY26, driven by strong domestic demand. Private consumption grew by 7%, while gross fixed capital formation expanded by 7.8%. The manufacturing and services sectors were key contributors, growing at 7.0% and 9.1%, respectively. However, lower-than-expected inflation, with CPI inflation averaging just 1.7% between April and December 2025, resulted in a revised nominal GDP growth of approximately 8% for FY26, below the initial budget assumption of 10.1%.
Sitharaman addressed concerns about the feasibility of the 10% nominal GDP growth target, citing the moderation of inflation as a key supporting factor. The budget documents indicate that the 10% nominal GDP estimate has been calculated using the current GDP base year and existing methodology. The government anticipates a recovery in inflation and continued economic momentum in FY27.
The Union Budget 2026 aims to strike a balance between growth and fiscal prudence. The fiscal deficit target has been set at 4.3% of GDP for 2026-27. The government projects that the Central Government debt to GDP ratio will be 55.6% in BE 2026-27. The budget continues to prioritize capital expenditure to support economic expansion, with a raise in the capex target to ₹12.2 lakh crore for FY27. Areas of focus include public investment, deregulation, labor market reforms, human capital investments, tax reforms, digital transformation, and formalization of the economy.
Morgan Stanley reported that the Union Budget 2026–27 is likely to support cyclical growth while reinforcing India's long-term structural strengths. The report also suggests a strategic shift towards manufacturing, particularly in high-value sectors such as semiconductors, which could boost capex, aid services-sector growth and accelerate the adoption of emerging technologies such as artificial intelligence. The budget includes measures to support services exports, with the aim of raising India's share of global exports to 10% by 2047.