India’s GDP Growth Estimated at 7.4% in FY26 as Consumption and Investment Surge: Economic Survey
The survey positions India as the fastest-growing major economy for the fourth consecutive year, despite global growth remaining subdued, geopolitical tensions and trade uncertainties.
The Department of Economic Affairs has released the Highlights of the Economic Survey 2025-26.
Released by the Ministry of Finance ahead of the Union Budget, the Economic Survey serves as the government’s principal assessment of the state of affairs of the nation’s economy. The Survey offers an overview of growth trends, fiscal position, sector-based performance markers and prospects.
The growth of India’s Gross Domestic Product (GDP) in the Financial Year 2025-26 is estimated at 7.4%, driven by the “twin engines” of consumption and investment. The survey positions India as the fastest-growing major economy for the fourth consecutive year, despite global growth remaining subdued amid geopolitical tensions and trade uncertainties.
Meanwhile real GDP growth for FY27 is projected in the range of 6.8% to 7.2%, while India’s medium-term potential growth is estimated at around 7%. The sustainable growth is attributed to rising domestic demand, underpinning economic expansion, aided by low inflation, stable employment conditions and rising purchasing power.
Private consumption picked up further in FY26, now accounting for a share of 61.5% in the GDP as per the First Advance Estimates.
The Economic Survey noted that this rise in consumption has been supported by steady rural demand due to a favourable performance in the agricultural sector over the year, along with a gradual recovery in urban spending.
The Survey further positions the rationalisation of direct and indirect taxes to improve real purchasing power as a key marker that helped sustain consumption momentum.
Investment continued to play a central role in supporting economic growth, with Gross Fixed Capital Formation (GFCF) estimated at 30% of GDP in FY26. Investment surged in the first half of the year, with GFCF expanding by 7.6%, outpacing both last year’s growth and the average before the COVID-19 pandemic.
The Department ofEconomic Affairs has attributed this momentum to improving confidence in the private sector and sustained public capital expenditure.
Sector-wise, agriculture and allied activities are estimated to grow by 3.1% in FY26, aided by a favourable monsoon.
Industrial activity showed notable strength, with manufacturing recording an 8.4% growth in the first half of the fiscal year, already surpassing the full-year estimate.
India’s continued resilience in the construction sector, supported by continued public infrastructure spending HAS also proved to be a major driver - with the services Gross Value Added (GVA) rising by 9.3% during the first half of the year.
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Lower Inflation
The Economic Survey further notes the easing of inflationary pressures during FY26, attributed to a decline in food prices. Lower inflation has helped improve real purchasing power for households, supporting consumption and reinforcing demand-led growth across the economy.
Interestingly, the survey notes that households face lower cost-of-living pressures, while businesses have benefited from improved cost visibility and demand conditions. This is said to have helped create a more stable economic environment.
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Even amid global trade uncertainties, India’s exports touched a record USD 825.3 billion during FY25, with the export sector carrying the same momentum into FY26.
All things considered, the Survey notes that domestic growth drivers continue to remain robust while macroeconomic fundamentals are well anchored.
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