The Indian economy was expected to accelerate at cheetah speeds. But the revised GDP data series, released Friday, shows no such thing.
Instead, it dropped a nuke. With nominal GDP pegged lower than the old 2011-12 series, India's deepest desire to emerge as the world's fourth largest economy got pushed down an elevator shaft. Well, slightly.
But first, the good news.
Real GDP growth rate for FY26 under the new base series, is pegged at 7.6% as against the First Advance Estimate of 7.4% and a neat 50 bps higher than 7.1% seen in FY25. Likewise, Q3 growth rate too came in higher at 7.8% as against 7.4% a year before.
At 7.6%, the annual growth rate isn't close to the enviable 8%, but given the geopolitical ju-jitsu, near enough counts in the sport called the big fat global economic race.
The National Statistics Office (NSO), wielding the plumber's wrench to capture structural changes and improvise estimation methodologies, revised the FY26 output in absolute numbers at Rs 322.58 lakh crore, as against Rs 299.89 lakh crore in FY25.
Interestingly, under the 2011-12 base series, FY26 output was estimated at Rs 201.89 lakh crore. Put another way, the economy scooped up a staggering Rs 120 lakh crore extra national output under the revised series. This isn't just any napkin math, but due to the much-needed arithmetic overhaul, which otherwise would have remained undercounted had NSO not yanked the statistical rug to clear out cobwebs.
It's the nominal GDP that holds the real intrigue. While FY26 nominal growth rate is pegged at 8.6%—lower than the trendline 10-11%—in absolute numbers, output is expected to turn in lower at Rs 345.47 lakh crore, down from the Rs 357 lakh crore estimated under the 2011-12 base series.
In dollar terms, India's economy is now estimated at roughly $3.8 trillion, down from $3.9 trillion. It means we fell one step behind from taking over Japan as the world's fourth-largest economy, widening India's $5 trillion and $10 trillion ambitions into a canyon.
Predictably, there was no joy on Dalal Street all day long. As traders pounded the sell arrow, (though not entirely due to GDP data), benchmark indices Sensex and Nifty seemed like a scene of carnage.
That said, NSO's Friday data dump confirmed that all components of GDP are pulsing vigorously. Robust growth needs investments and consumption to go together like knights and bishops, and the good news is that they finally seem ready to captain the ship.
Private consumption and investments grew at 7.7% and 7.1%, respectively, and higher than the pre-Covid trend of sub-7%. On the demand side, domestic demand continues to drive growth, while on the supply side, manufacturing activity gained traction, and services continued to drive the overall expansion, led by trade, transport, and financial and professional services.
The share of private consumption expenditure in GDP stood at 55.7% in FY26, reflecting a supportive macroeconomic environment, helped by low inflation, stable employment conditions, and rising real purchasing power. Moreover, steady rural consumption, supported by agricultural output, and the gradual improvement in urban consumption and direct and indirect tax relief, reaffirms that the momentum in consumption demand is broad-based.
Private investments are doing their bit, with their share estimated at 32%. According to the Economic Survey, investment activity strengthened in the first half of the fiscal, expanding by 7.6%, exceeding the pace seen in last year and remaining above the pre-pandemic average of 7.1%. Government consumption expenditure grew at the trendline growth rate of 6.6%, while its share in GDP stood at 10.2%.
Even as growth was strong in the first half at an average 8%, analysts expect the second to average 7.5% with Q4 likely showing up tepid growth. FY27 too is expected to see moderate growth, thanks to the absence of consumption boosting measures in budget and given that the GST rationalization impact may not last long. While it's undeniable that there's resilience in the economy, and the recent tariff-related developments offer an additional source of comfort, it's unclear if we have enough adrenaline for the race ahead.
While domestic drivers are primary growth engines in FY26 like any other fiscal, external demand with a share of over 21% of GDP also aided growth. Services exports too continued to provide a stable anchor for growth, partially offsetting the greater volatility in goods exports, amid tariff-related uncertainties.
On the supply-side, growth was led by the industry and services sectors supported by sustained capex, improved capacity utilization, and steady demand for services.
If there's one wrong beat in the band, it's the primary sector that's set to grow at a dismal 2.6% in FY26 as against 4.9% in FY25. Within this, agriculture and allied services are projected to grow at 2.4%, lower than 4.2% a year before. The most worrisome growth is from mining and quarrying that's estimated at 4.1% down from the 11.7% registered in FY25 and certainly needs to be pushed like a handcart.
As for the industry, it's a shade better at 9.1% this fiscal compared to 8% seen a year before. Within industry, manufacturing sector growth is helpfully back to double-digits at 11.5%, while construction retained the 7% band at 7.1%. In real terms, manufacturing's share has remained steady at about 17-18%.
Services sector growth at 9% indicates a further acceleration in services-led expansion with all sub-segments clocking in better output than last year.
FY26 was an unusually challenging year. Heightened uncertainty in global trade, penal tariffs and external sector volatility created stress for manufacturers, particularly exporters, and affected business confidence. As the Survey recently noted, FY27 will be a year of adjustment and the outlook is one of steady growth, requiring caution, not pessimism.
