New Delhi: India’s economy is poised for strong expansion, with real GDP projected to rise by 7.4% in the financial year 2025–26, Union Finance Minister Nirmala Sitharaman announced while presenting the Union Budget 2026-27 in Parliament. Nominal GDP is expected to grow by 8% this year, while forecasts for FY 2026-27 indicate a further increase to 10%, highlighting the resilience of the Indian economy amid global uncertainties.
The services sector continues to lead the growth story, expanding by 9.1%, while manufacturing and construction grew by 7% and agriculture by 3.1% in FY25-26. Rising domestic demand is providing a strong foundation for growth, with private final consumption expenditure projected to increase by 7%, now accounting for 61.5% of GDP—the highest share since FY12. Government spending is also set to rise, growing 5.2% year-on-year, further supporting economic stability.
Investment activity remains robust, with gross fixed capital formation expected to rise by 7.8% in FY26. The Union Government’s effective capital expenditure for FY 2026-27 is projected at ₹17.15 lakh crore, including ₹12.22 lakh crore by the Centre and ₹4.93 lakh crore in grants to states for the creation of capital assets. These investments are aimed at infrastructure development, job creation, and long-term economic growth.
Fiscal management remains a key focus, with the fiscal deficit estimated at 4.3% of GDP and the revenue deficit projected at 1.5%, while the effective revenue deficit is expected to be just 0.3%. The Central Government’s debt-to-GDP ratio is set to decline to 55.6%, moving closer to the medium-term target of 50% by 2030-31, signaling continued fiscal prudence.
Gross tax revenue is anticipated to reach ₹44.04 lakh crore, with direct taxes contributing ₹26.97 lakh crore and indirect taxes ₹17.07 lakh crore. Net tax revenues for the Centre are projected at ₹28.67 lakh crore, while states are expected to receive ₹16.56 lakh crore through tax devolution and grants, supporting regional development and balanced fiscal growth.
India’s external sector also shows strength, with exports reaching USD 825.3 billion in FY25 despite global trade challenges. Foreign direct investment inflows stood at USD 81 billion, while the current account deficit narrowed to 0.8% of GDP in the first half of FY26, down from 1.3% in the same period last year, reflecting robust external balances and continued investor confidence.
Finance Minister Sitharaman emphasized that India’s growth trajectory is being supported by structural reforms, digitalisation, tax and labor reforms, strong domestic demand, and private-sector investment. With continued fiscal discipline and targeted capital expenditure, the government aims to maintain macroeconomic stability while fostering inclusive and sustainable growth, paving the way for a Viksit Bharat.
