Economic Survey 2025-26: India's GDP Growth at 7.4%, Fastest-Growing Major Economy for Fourth Year

India's GDP growth for FY26 is estimated at 7.4 percent, powered by robust consumption and investment, reaffirming the nation's status as the fastest-growing major economy for the fourth consecutive year. Finance Minister Nirmala Sitharaman tabled the Economic Survey 2025-26 in Parliament on Wednesday, presenting a comprehensive assessment of the economy's performance and outlook.

The Survey projects real GDP growth for FY27 in the range of 6.8 to 7.2 percent, with India's potential growth estimated at around 7 percent.

Consumption Emerges as Growth Driver

Private final consumption expenditure has risen to 61.5 percent of GDP in FY26, reflecting a supportive macroeconomic environment characterized by low inflation, stable employment, and rising real purchasing power.

Rural consumption has remained steady, bolstered by strong agricultural performance, while urban consumption has gradually improved following rationalization of direct and indirect taxes. The Survey notes that consumption momentum is now broad-based across segments.

Investment Activity Strengthens

Gross fixed capital formation stands at 30 percent of GDP, with investment expanding by 7.6 percent in the first half of FY26—exceeding both last year's pace and the pre-pandemic average of 7.1 percent.

Public capital outlays reached nearly 60 percent of budgeted allocation by November 2025, while revenue expenditure growth remained contained, reinforcing the quality of public spending.

Sectoral Performance

Agriculture: Growth estimated at 3.1 percent for FY26, supported by favorable monsoon conditions. Agricultural GVA grew 3.6 percent in H1 FY26, with allied activities including livestock and fisheries maintaining stable 5-6 percent growth rates.

Manufacturing: The industrial sector shows significant strength, with manufacturing growing 8.4 percent in H1 FY26, surpassing the full-year estimate of 7.0 percent. The industrial sector is expected to grow 6.2 percent, up from 5.9 percent in FY25.

Services: Gross Value Added for services increased 9.3 percent in H1 FY26, with estimated 9.1 percent growth for the full fiscal year. All sub-segments grew above 9 percent except trade and hospitality, still recovering from pandemic impacts.

Inflation at Historic Lows

Headline CPI inflation declined to 1.7 percent during April-December FY26, driven primarily by corrections in vegetable and pulse prices. The Survey notes limited demand-side overheating, with the inflation outlook remaining benign.

Banking Sector Health

Gross non-performing asset ratios declined to multi-decade lows of 2.2 percent. The slippage ratio remained stable at 0.7 percent, while profitability improved with robust net interest margins.

Monetary Policy Support

The RBI delivered cumulative repo rate cuts of 125 basis points since February 2025, complemented by liquidity injection through CRR cuts (₹2.5 lakh crore), open market operations (₹6.95 lakh crore), and forex swaps of approximately $25 billion.

Weighted average lending rates on fresh loans declined by 59 basis points, while rates on outstanding loans fell 69 basis points between February and November 2025.

Record Export Performance

India's total exports reached a record $825.3 billion in FY25, with momentum continuing in FY26. Despite US tariffs, merchandise exports grew 2.4 percent and services exports increased 6.5 percent during April-December 2025.

The current account deficit remains moderate at 0.8 percent of GDP in H1 FY26. Forex reserves cover over 11 months of imports and approximately 94 percent of external debt.

Historic India-EU FTA Concluded

In a landmark development, India concluded a Free Trade Agreement with the European Union after three years of negotiations. The agreement now requires ratification by the European Parliament. The Survey also notes trade agreements signed with the UK, Oman, and New Zealand, with active negotiations ongoing with the United States.

Credit Rating Upgrade

S&P Ratings upgraded India from 'BBB-' to 'BBB', acknowledging fiscal discipline and commitment to the fiscal glide path. CareEdge Global assigned a 'BBB+' rating, underscoring robust economic performance.

Labour Code Implementation

The Union government notified implementation of Labour Codes, consolidating 29 central laws into four codes to simplify compliance, enhance labor market flexibility, and extend security to a broader workforce section.

Outlook and Risks

The Survey acknowledges external uncertainties including global trade fragmentation, geopolitical tensions, and financial vulnerabilities. However, domestic fundamentals remain strong with healthy household, firm, and bank balance sheets.

"The outlook is one of steady growth amid global uncertainty, requiring caution, but not pessimism," the Survey concludes, projecting FY27 growth at 6.8-7.2 percent with broadly balanced risks.