India’s economy is projected to maintain strong growth momentum, with real GDP estimated to expand by 7.4 per cent in FY 2025-26, while nominal GDP growth is pegged at 8 per cent, according to the Macroeconomic Framework Statement tabled in Parliament along with the Union Budget for FY 2026–27.
The document, presented by Union Finance Minister Nirmala Sitharaman, projects nominal GDP growth of 10 per cent in FY 2026–27 over the first advance estimates of FY26, reflecting continued strength in domestic demand, investment, and structural reforms.
The services sector remains the primary driver of growth, expanding by 9.1 per cent in FY26. Manufacturing and construction are estimated to grow by 7 per cent, while agriculture is projected to register a growth of 3.1 per cent.
Domestic demand continues to anchor economic expansion. Private Final Consumption Expenditure (PFCE) is projected to grow by 7 per cent, accounting for 61.5 per cent of GDP—the highest share since FY 2011–12. Government final consumption expenditure is expected to rebound strongly, growing by 5.2 per cent in FY26 compared to 2.3 per cent in FY25.
Investment activity remains robust, with Gross Fixed Capital Formation (GFCF) rising by 7.8 per cent in FY26. The share of GFCF has remained stable at around 30 per cent of GDP over the past three years, indicating sustained capital formation.
India’s total exports of goods and services reached USD 825.3 billion in FY25 and continued to show momentum in FY26 despite an uncertain global tariff environment. Merchandise exports grew by 2.4 per cent during April–December 2025, while services exports rose by 6.5 per cent. Gross foreign direct investment inflows stood at USD 81 billion in FY25, with FY26 witnessing the highest inflows in the first seven months of any financial year.
The current account deficit narrowed to 0.8 per cent of GDP in the first half of FY26, down from 1.3 per cent in the same period of FY25.
The Union Budget 2026–27 continues the government’s fiscal consolidation path, targeting a fiscal deficit of 4.3 per cent of GDP, compared to 4.4 per cent in the revised estimates for FY25–26. Central government debt is projected to decline to 55.6 per cent of GDP in FY27, from 56.1 per cent in FY26.
Gross tax revenue for FY27 is estimated at ₹44.04 lakh crore, representing 11.2 per cent of GDP. Direct taxes are expected to contribute over 61 per cent of total tax revenue.
The total expenditure of the Centre in FY27 is projected at ₹53.47 lakh crore. Capital expenditure is estimated at ₹12.22 lakh crore, while effective capital expenditure—including grants to states for asset creation—is projected at ₹17.15 lakh crore, equivalent to 4.4 per cent of GDP.
Based on the recommendations of the Sixteenth Finance Commission, total resources transferred to states through tax devolution and grants are estimated at ₹16.56 lakh crore in FY27, including ₹15.26 lakh crore as tax devolution and ₹1.4 lakh crore as Finance Commission grants.
The Finance Ministry noted that India’s growth outlook remains positive, supported by strong domestic demand, public investment, deregulation, labour market reforms, digital transformation, and improved balance sheets in the corporate and financial sectors. Inflation is expected to remain benign, while sovereign rating upgrades during the year reflect growing confidence in India’s macroeconomic stability.
The government reiterated its commitment to maintaining fiscal prudence while supporting growth, with the medium-term goal of reducing the debt-to-GDP ratio to around 50 per cent by FY 2030–31 as part of its vision of building a “Viksit Bharat.”
