India's GDP to grow 7.6 pc in FY26 after revamp of calculation framework

New Delhi, Feb 27 (PTI) India's economic growth estimate was raised to 7.6 per cent for the current fiscal on Friday following a revamp of the GDP calculation framework, underscoring the resilience of the world's fastest-growing major economy amid global trade disruptions.

The growth forecast for the fiscal year ending March, released by the National Statistics Office under a new series of national accounts, compares to the previous estimate of 7.4 per cent under the old data series, and 7.1 per cent in the previous 2024-25 fiscal year.

The calculation revamp, which included a change of base year to 2022-23 and improved capture of faster-growing segments of the economy, however, led to a moderation in real GDP growth in October-December (the third quarter of the current 2025-26 fiscal year) to 7.8 per cent from 8.4 per cent in Q2.

The methodological overhaul, aimed at addressing concerns over outdated data practices and improving accuracy, is expected to better reflect updated production structures, expand sectoral coverage, incorporate revised ratios, and utilise more representative government datasets, including improved estimates of activity in the informal sector.

India's nominal GDP for 2025-26 (April 2025 to March 2026 fiscal), which excludes the impact of inflation, is estimated to grow at 8.6 per cent.

In the budget for the financial year 2026-27, the government has estimated India's nominal growth rate for the next year at 10 per cent under the old base year.

For much of the current financial year, the Indian economy had to contend with uncertainty from tariffs, which weighed on exports.

The Modi government responded by overhauling GST, which lowered taxes on hundreds of items, and implementing long-delayed labour reforms. These, together with the lower income tax burden, cut in interest rates, low inflation and strong rural demand, kept the momentum in the economy.

Earlier this month, New Delhi reached an interim agreement with Washington that reduces effective tariffs to 18 per cent from 50 per cent, before the US Supreme Court struck down President Donald Trump's global tariffs.

India's Chief Economic Advisor V Anantha Nageswaran said the economic growth projection for the next fiscal has been revised upwards by 20 basis points to 7-7.4 per cent following the release of the new GDP series.

The Economic Survey presented in Parliament in January projected a growth rate of 6.8-7.2 per cent for the fiscal year 2026-27.

"The economy is more likely to achieve a number closer to 7.4 per cent rather than 7 per cent," he said, adding that based on current indicators, nominal GDP growth would be close to 11 per cent and the size of the economy would comfortably cross the USD 4 trillion-mark.

Nageswaran also asserted that the Indian economy continues to maintain strong growth momentum, supported by broad-based activities.

According to NSO data, the service sector performance signalled a strong lift, especially the labour-intensive segments in FY26, besides a double-digit growth in manufacturing activity. As it stands, the October-December quarter also benefited from indirect tax rationalisation and festive demand, in addition to better faring rural farm sector.

Aditi Nayar, Chief Economist, ICRA Ltd, said the moderation in Q3 was expectedly driven by the agriculture and the non-manufacturing industrial sectors, including mining, electricity and construction segments.

"The data for FY2023-25 has been revised materially as per the new 2022-23 base. Notably, the size of the Indian economy is estimated to be somewhat smaller than that, as per the 2011-12 base; the nominal GDP for FY2024 and FY2025 is 3.8 per cent each, lower than that estimated in the old series," she said. "More importantly, this would also imply a fiscal deficit target of 4.46 per cent of GDP for FY2027, as against the 4.3 per cent assumed in the budget, assuming a nominal GDP growth of ~10 per cent in the fiscal." Projecting a GDP growth of 7 per cent in the 2026-27 fiscal, Icra said there is a higher likelihood of a prolonged pause on the interest rate by RBI, amid expectations of a base-led uptick in the CPI inflation in the near term.

The Ministry of Statistics and Programme Implementation (MoSPI) on Friday released the New Series of Annual and Quarterly National Accounts Estimates with base year 2022–23, which replaces the previous series with a base year of 2011–12. This is the 9th base revision of the GDP series.

According to the new series, the gross domestic product (GDP) in the October-December quarter of 2025-26 grew by 7.8 per cent, up from 7.4 per cent in the year-ago period, mainly driven by the manufacturing and services sectors.

Further, the GDP growth for the second quarter has been revised upwards to 8.4 per cent from 8.2 per cent in the old series (base: 2011-12), while for the first quarter, it has been lowered to 6.7 per cent from 7.8 per cent.

"Real GDP or GDP at Constant Prices is estimated to attain a level of Rs 322.58 lakh crore in the FY 2025-26, against the First Revised Estimate (FRE) of GDP for the year 2024-25 of Rs 299.89 lakh crore. The growth rate in Real GDP during 2025-26 is estimated at 7.6 per cent as compared to 7.1 per cent in 2024-25," MoSPI said, while releasing the new series.

The series provides the 'Second Advance Estimates of Annual GDP for FY 2025–26' and 'Quarterly Estimates of GDP from Q1 (April-June) of FY 2022-23 to Q3 (October-December) of FY 2025-26'.

Nominal GDP has witnessed a growth of 8.6 per cent during 2025-26.

These growth rates are revised upward from their respective First Advance Estimates computed using previous base year (2011-12), MoSPI said.

It further said that the economy has exhibited sustained performance, recording real GDP growth rates of 7.2 per cent and 7.1 per cent, respectively, during 2023–24 and 2024–25. Nominal GDP has registered 11 per cent and 9.7 per cent growth rates during 2023–24 and 2024–25, respectively.

"Manufacturing sector has been the major driver in contributing to the resilient performance of the economy in consecutive three financial years after rebasing. This sector has attained double-digit growth rates in 2023-24 and 2025-26," MoSPI said.

'Trade, Repair, Hotels, Transport, Communication and Services related to Broadcasting, Storage' sector has attained a growth rate of 10.1 per cent at constant prices in 2025-26.

On the consumption side, both the Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) have exhibited more than 7 per cent growth rate in 2025-26.

The new series uses new data sources like Goods and Services Tax (GST) data, Public Finance Management System (PFMS), E-vahan, which are more comprehensive and available at a shorter time lag, and have been explored for augmenting the existing data sources for compilation and corroboration of estimates.

Further, MoSPI said that in the new series, double deflation will be used in the manufacturing and agriculture industries and single extrapolation elsewhere.

As such, single deflation has been completely done away with. Besides, deflators will be used at a more granular level.

In the old series, the household sector was estimated either through inter-survey growths or through some proxy indicators.

In the new series, level estimates of the household sector will be compiled through regular surveys – Annual Survey of Unincorporated Sector Enterprise (ASUSE) and Periodic Labour Force Survey (PLFS) - conducted each year. PTI NKD ANZ HVA