The News Freedom
New Delhi, January 29
India’s economy is expected to grow by 7.4% in the financial year 2025–26, driven by strong domestic consumption and investment, according to the Economic Survey 2025–26 tabled in Parliament by Finance Minister Nirmala Sitharaman.
The Survey says India will remain the world’s fastest-growing major economy for the fourth year in a row. It projects real GDP growth of between 6.8% and 7.2% in 2026–27, with the country’s medium-term growth potential estimated at around 7%.
Domestic demand continues to underpin growth. Private consumption expenditure rose to 61.5% of GDP in FY26, supported by low inflation, stable employment and rising purchasing power. The Survey notes that rural demand has been strengthened by good agricultural performance, while urban consumption has improved following tax rationalisation.
Investment has also remained a key driver. Gross fixed capital formation is estimated at 30% of GDP, with investment growth accelerating in the first half of FY26. Agriculture and allied activities are expected to grow by 3.1%, aided by a favourable monsoon and steady expansion in livestock and fisheries.
The industrial sector has shown signs of strengthening, with manufacturing growing by 8.4% in the first half of FY26. Construction activity has remained resilient, supported by public spending on infrastructure. Services continue to lead growth, with gross value added rising by more than 9%, reflecting broad-based expansion across most segments.
The Survey points to a sharp easing of inflation, with headline consumer price inflation falling to 1.7% during April–December FY26, mainly due to lower food prices. This has helped boost real incomes and consumption, while the overall inflation outlook remains benign.
Public finances have been supported by steady tax collections and higher capital expenditure. Gross tax revenues have progressed in line with budget targets, while capital outlays reached nearly 60% of the annual allocation by November 2025. Rating agencies have acknowledged India’s fiscal discipline, with S&P upgrading the country’s sovereign rating.
On the external front, India’s total exports reached a record $825.3bn in FY25, with momentum continuing in FY26. The current account deficit remains moderate, while foreign exchange reserves provide a comfortable buffer against global uncertainty.
The Survey notes that despite a fragile global environment marked by geopolitical tensions and trade disruptions, India’s domestic fundamentals remain strong. It concludes that the economy is well placed to sustain steady growth, even as external risks persist.