The Indian economy is expected to grow by 7.4 percent in 2025-26 as against 6.5 percent the year before, according to the first advance estimates. The projection exceeds the government’s initial estimate of 6.3-6.8 percent, but is in line with the RBI’s revised estimate of 7.3 percent. Buoyant growth in services and manufacturing sector helped the economy register a real gross value added growth of 7.3 percent. The biggest setback, however, came from the primary sector comprising agriculture, allied segments, mining and quarrying, which together saw a dismal growth of 2.7 percent, as against 4.4 percent last year. While agriculture’s growth moderated to 3.1 percent from 4.6 percent, mining and quarrying suffered a decline of -0.7 percent, as against last year’s 2.7 percent growth. Within the industrial sector, construction growth slowed to 7 percent from 9.4 percent, while electricity and other utilities saw moderate growth. Manufacturing and construction turned in 7 percent each—way below their potential.
Apart from the heart-warming headline growth numbers, the estimates stand out for two other reasons. One, this is the final GDP-related data release on the 2011-12 base year; the second advance estimates next month will be based on a new national accounts series. Two, in absolute numbers, real GDP is expected to cross Rs 200 lakh crore in 2025-26. But much before Wednesday’s data dispatch, the finance ministry took the applause last month for overtaking Japan. With GDP valued at $4.18 trillion, it noted that India had become the world’s fourth largest economy and was poised to displace Germany in about three years with a projected GDP of $7.3 trillion by 2030. However, the IMF punctured those beliefs stating that India’s GDP would edge past Japan’s $4.46 trillion only in 2026.
What’s also concerning are the prevailing geopolitical tensions, which cast a doubt on whether India can sustain the growth momentum next fiscal. As the RBI noted last month, India is currently in a rare ‘Goldilocks phase’ of high growth and low inflation, but that could change if global demand slows or crude oil prices rise. Much depends on how India navigates the diplomatic tightrope with the US, which insists on cutting down on cheap Russian oil. Though exports held up in 2025-26, the sector will be under pressure in the absence of a trade deal with the US this year.