Economic Survey 2024-25: India's GDP growth for FY26 estimated at 6.3-6.8%

India's real gross domestic product (GDP) growth for FY2025-26 is estimated to be in the range of 6.3-6.8%, according to the Economic Survey 2024-25 tabled in Parliament today. On the supply side, the economic forecast says that the real gross value added (GVA) growth for FY25 is estimated to be 6.4%.

"There are many upsides to domestic investment, output growth and disinflation in FY26. There are equally strong, prominently extraneous, downsides too. Nonetheless, the fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption. On balance of these considerations, we expect that the growth in FY26 would be between 6.3 and 6.8 per cent," the Economic Survey 2024-25 states.

It adds that from the angle of aggregate demand in the economy, private final consumption expenditure at constant prices is estimated to grow by 7.3%, driven by a rebound in rural demand.

"Private final consumption expenditure (PFCE) as a share of GDP (at current prices) is estimated to increase from 60.3% in FY24 to 61.8% in FY25. This share is the highest since FY03. Gross fixed capital formation (GFCF) (at constant prices) is estimated to grow by 6.4 per cent," shows the Economic Survey 2024-25.

The survey says the agriculture sector is expected to rebound to a growth of 3.8% in FY25 and the industrial sector is estimated to grow by 6.2%. "Strong growth rates in construction activities and electricity, gas, water supply and other utility services are expected to support industrial expansion," it says.

In the services sector, the growth is expected to remain robust at 7.2%, driven by healthy activity in financial, real estate, professional services, public administration, defence, and other services.

The real GVA grew by 6.2% in H1 of FY25. "A strong growth momentum in Q1 of FY25 was followed by a subdued performance in Q2 of FY25. The agriculture and services sectors emerged as key growth drivers during this period," says the survey.

The survey notes that overall, the growth was tempered by a moderation in industrial activity, particularly in manufacturing, which faced challenges from slowing global demand and supply chain disruptions.

Terming the projections for India from the lens of the World Economic Outlook (WEO) of the International Monetary Fund as recently as October of FY25 are "sanguine", the document says the IMF WEO projects India to become a $5 trillion economy by FY28 and reach a size of $6.307 trillion by FY30. "This translates into an annual nominal growth rate of nearly 10.2% per cent in US dollar terms for FY25 to FY30."

To put this in context, in the 30 years between FY1994 and FY2024, India's dollar GDP grew at a compounded annual rate of 8.9%. So, the IMF expects India to grow at a significantly higher rate of 10.2% in dollar terms in the next five years.

Notably, India’s GDP at constant (2011-12) prices grew by 6.7 per cent and 5.4 per cent in Q1 and Q2 FY25, respectively. This implied a real GDP growth of 6.0 per cent in the first half of the current fiscal. "The moderation in real GDP growth can be traced to a softening of growth in Gross Fixed Capital Formation (GFCF) from 10.1 per cent in H1 FY24 to 6.4 per cent in H1 FY25," the survey says.

It also adds that Q1 FY25 witnessed a slowdown in capital expenditure across different levels of government on account of the conduct of the general elections. Private sector investment growth may have remained subdued thus far in FY25 on account of the domestic political timetable, global uncertainties and overcapacities.