India will remain the fastest growing major economy in the world during the financial year ending March 2026, with its economy projected to grow 7.4 per cent, according to the first advance estimates released Wednesday by the National Statistics Office.

This fast paced growth is expected to give the government headroom to splurge more on infrastructure and undertake larger-than-before modernisation of its defence forces in an uncertain world, according to top finance ministry officials.

The forecast released today, exceeds last year's growth of 6.5 per cent and is above earlier projections for fiscal 2025-26 that ranged between 6.5 per cent and 6.8 per cent.

The estimates, published by the Ministry of Statistics and Programme Implementation, are preliminary and will be revised as additional data become available.

Top North Bloc officials told UNI "the GST cuts announced late last year will expand consumption-led growth and we can look at a larger budget, more spending on infrastructure." Policy announcements in several key sectors ranging from "chip making, rare earths and nuclear plants will also give a push to both budgetary outlays as well as the real economy," they said.

The importance of this data release is that India's budget, expected to be released on February 1, will be based on this growth projections. India's union Budget for 2025-26 had pegged total expenditure at about Rs 50.65 lakh crore, underscoring a continued push toward growth-led consolidation, allocating more than Rs 11 lakh crore to capital expenditure.

India's defence spending in last year's budget was raised by nearly 10 per cent. "More money is expected to be spent this year" as the air force modernises its fleet and India looks to update its armed forces with more drones and cyber warfare capabilities "in the face of a more uncertain global environment with many small wars cropping up as the world slides towards multi-polarity," said officials. India had engaged Pakistan with air and missile strikes earlier during May 2025.

India's fast paced consumption growth, expected to expand by 7 per cent in 2025-26, was seen as a driving force for the country's growth. Though consumption, which accounts for 60 per cent of the GDP calculated by expenditure, grew this year at a slightly slower pace compared to the 7.2 per cent clocked in the previous year.

"Actually this first advance estimate is likely an under-estimation. I can clearly see the consumption expansion should be more than the 7.2 per cent recorded last year. The lower prices of consumables, driven by GST cuts will kick in the last quarter of this year and should give a fillip to the economy," said Dr N R Bhanumurthy, Director of the Madras School of Economics.

Service sector growth remained the main driver of India's growth story, though manufacturing, which accounts for nearly a sixth of the economy, also grew at 7 per cent giving more than the expected nudge. Agriculture, however, grew at a far more tamer rate of 3.1 per cent.

"The GST cut is a game changer and can also expected to give a push to manufacturing sector and its growth should be far higher than that projected … I would estimate it to be nearer 7.5 per cent," said Bhanumurthy.

Financial, real estate and professional services, along with public administration, defence and other services within the tertiary sector, are estimated to post robust growth of 9.9 per cent at constant prices in fiscal 2025-26. Trade, hotels, transport, communication and broadcasting-related services are projected to expand by 7.5 per cent in real terms over the same period.

Real private final consumption expenditure is estimated to rise 7 per cent in fiscal 2025-26, while gross fixed capital formation is projected to grow 7.8 per cent at constant prices, accelerating from a 7.1 per cent expansion in the previous fiscal year.

The NSO said that in nominal terms, which factors inflation, India's economy can be expected to grow by 8 per cent, compared with a higher 10.1 per cent estimate in the annual budget announced last year.