MoSPI Projects 7.4% GDP Growth for India in FY 2025-26: Sector Analysis and Investment Outlook

India’s economy is projected to expand by 7.4 percent in FY 2025-26, according to the First Advance Estimates released by the Ministry of Statistics and Program Implementation (MoSPI). The outlook reflects sustained investment activity and continued strength in manufacturing and services, even as global economic conditions remain uncertain.

In nominal terms, the gross domestic product (GDP) is expected to grow by 8 percent for FY 2025-26. These estimates will serve as the macroeconomic baseline for fiscal planning and budget calculations, including projections related to tax revenues, fiscal deficit ratios, and public debt.

Key growth indicators for FY 2025-26

The Indian economy’s sustained strong growth momentum in FY 2025-26 is driven primarily by continued expansion in the services sector alongside steady growth in investment and household consumption.

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• Real GDP is projected to grow by 7.4 percent in FY 2025-26, up from 6.5 percent in FY 2024-25.
• Nominal GDP is estimated to rise by 8 percent over the year.
• Real Gross Value Added (GVA) is forecast to expand by 7.3 percent, indicating broad-based sectoral growth with services as the principal contributor.

As per MoSPI’s estimates, since the economic contraction during the pandemic year (FY 2020-21), India has recorded average annual growth of around 8.2 percent up to FY 2024-25, underscoring a sustained recovery and expansion phase.

Business takeaway: India demonstrates strong growth profiles among major economies, reinforcing its position as a priority market for long-term investment.

Key drivers of India’s economic growth

Household consumption

Private consumption, the largest contributor to GDP, is expected to grow by 7 percent in FY 2025-26, marginally lower than the 7.2 percent recorded in FY 2024-25. Consumption growth is being supported by steady rural demand and a gradual recovery in urban spending.

Investment activity

Gross Fixed Capital Formation, which includes investments in machinery, factories, and infrastructure, is projected to expand by 7.8 percent, up from 7.1 percent in FY 2024-25. This indicates continued momentum in public infrastructure spending and improving private investment conditions.

Government expenditure

Government final consumption expenditure is estimated to grow by 5.2 percent, compared with 2.3 percent in FY 2024-25, providing additional support to overall demand.

How different sectors are driving India’s GDP in FY 2025-26

The latest estimates show that India’s economic growth in FY 2025-26 is being led primarily by the services and manufacturing sectors, while agriculture remains stable and mining shows some weakness.

*FRE: First Revised Estimates | **PE: Provisional Estimates | ***FAE: First Advance Estimates

**** Includes education, health, and other personal services.

CLICK HERE: India’s Services Sector Performance and Contribution to GDP in 2025: An Overview

Central bank and policy assessments

The Reserve Bank of India (RBI) had earlier projected 7.3 percent real GDP growth for FY 2025-26, citing strong industrial output, healthy agricultural performance, robust rural demand, and recovering urban consumption. The RBI expects growth of around 7 percent in the December quarter (October-December 2025) and 6.5 percent in the March quarter (January-March 2026), while strong performance in the September quarter has reinforced optimism for the full year.

External forecasts and investment climate

International and domestic institutions broadly align with the government’s growth outlook:

• The Asian Development Bank (ADB) revised its FY 2025-26 growth forecast for India to 7.2 percent, up from 6.5 percent, driven by strong domestic consumption and steady export performance.
• India Ratings and Research (Fitch Group) expects growth of 7.4 percent in FY 2025-26 and 6.9 percent in FY 2026-27 (April 2026-March 2027).

As per several think tank agencies and economic experts, ongoing domestic reforms, such as income tax adjustments, goods and services tax (GST) rationalization, and recent trade agreements with the United Kingdom (UK), New Zealand, and Oman, are expected to help cushion the economy against global headwinds, including trade-related uncertainties.

ALSO READ: India’s FTA Network: Updates in 2025

Risks and planning considerations for businesses

Despite a positive near-term outlook, companies should factor in several medium-term risks:

• Potential El Niño-related weather disruptions
• Weak global trade growth and external demand pressures
• Volatile capital flows and currency movements
• Base effects following strong FY 2025-26 growth
• Structural adjustments linked to emerging technologies, including AI

Additionally, FY 2025-26 will be the final year using the 2011-12 GDP base, with a revised national accounts series (base year 2022-23) scheduled for release in February 2026. Economists do not expect material shifts in growth trends following this transition.

Overall business assessment

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India’s FY 2025-26 economic outlook remains constructive for investors and operating companies. Strong domestic demand, sustained capital investment, and policy continuity provide a supportive environment for expansion, localization, and long-term market positioning.

For businesses, the key opportunity lies in aligning strategies with service-led growth, manufacturing expansion, infrastructure development, and domestic consumption, while building flexibility to manage global volatility and policy transitions.

Conclusion

Despite ongoing global uncertainties, India’s economic outlook for FY 2025-26 remains broadly positive. Strong domestic demand, sustained investment activity, and the continued impact of structural reforms are expected to support stable growth, positioning the economy for resilience in the near to medium term.

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