India’s economic growth in FY26 is expected to remain strong, with gross domestic product (GDP) likely to expand by about 7.5%, carrying a modest upward bias, SBI Research said.
The first advance estimates place growth at 7.4%, up from 6.5% in FY25, while Gross Value Added (GVA) is projected at 7.3%. Nominal GDP growth is estimated at 8%.
“We, however, believe that GDP growth for FY26 would be around 7.5% with upward bias,” SBI Research said in a report.T
The second advance estimates, incorporating additional data and revisions, are scheduled to be released on February 27, 2026.
“So, all these numbers are expected to change with the base revision to 2022-23,” it said.
Base Revision Factor: Why 7.4% is Just the Starting Point
While tax collections may fall slightly short of targets, higher non-tax revenues are expected to offset the gap, kit said.
Total expenditure is also projected to be lower than budgeted, resulting in a fiscal deficit of Rs 15.85 lakh crore, marginally above the estimate of Rs 15.69 lakh crore.
“With the new GDP figure fiscal deficit as % of GDP is likely to remain un-changed at 4.4%,” it said.
Fiscal parameters remain broadly stable. By the end of November 2025, the fiscal deficit stood at ₹9.8 lakh crore, or 62.3% of the budget estimate.
The debt-to-GDP ratio has been marginally revised downward by 7 basis points to 56.07%, reinforcing the outlook for fiscal stability.
Demand Dynamics: Public Spending Offsets Private Moderation
On the demand side, government final consumption has emerged as a key driver, likely growing 5.2% in real terms. Exports have also remained resilient, recording a 6.4% increase. Private consumption, however, expanded at a relatively moderate 7%, reflecting a slowdown in agricultural activity. Per capita consumption expenditure rose by 6.1%. Overall, higher public spending and continued strength in services helped sustain demand and soften the impact of global headwinds.
Investment activity shows signs of revival, SBI Research said.
Gross capital formation, which had weakened last year, recovered with real growth of 7.8%—about 70 basis points higher than the previous year. Nominal capital formation also accelerated, indicating improved investment sentiment. Imports grew 9% in nominal terms and 14.4% in real terms, although this pace is expected to ease in FY27 in line with a softer outlook on energy prices.