GDP Growth: Big News Before Budget India GDP Projected To Grow At 7 Point 4 Percent
GDP Growth: With only a few weeks left before the Union Budget presentation, extremely positive news has emerged regarding the Indian economy. according to official statistics, India’s GDP is set to witness significant growth in the current fiscal year. The National Statistical Office (NSO) has released its ‘First Advance Estimates’, projecting that India’s economy could grow at a rate of 7.4% in the fiscal year 2025-26.
These statistics play a crucial role in budget preparation. Let’s take a look at which aspects of the economy have strengthened according to this new data and where the challenges lie.
GDP Growth Forecast and Its Nature
The government usually releases these ‘First Advance Estimates’ before presenting the budget on February 1st. Based on this, the government calculates tax revenues and fiscal deficits for the coming year. Two distinct pictures have emerged from the current statistics:
- Real GDP: This index measures the actual growth of the economy by excluding the impact of inflation. While the growth rate was 6.5% in the last fiscal year (2024-25), it is expected to rise to 7.4% this year. This indicates a strong foundation for the economy.
- Nominal GDP: calculated based on current market prices. Last year it was 9.8%, which is estimated to decrease to 8% this time.
Why is Nominal GDP Lower?
You might wonder, why is Nominal GDP decreasing when Real GDP is increasing? The main reason is the control over inflation. Last year, inflation was high (above 6%), so the Nominal GDP figure was higher. But this year, with inflation being under control (in the 2-4% range), the nominal growth rate appears lower, which is actually a relief for the common people.
Sector-wise Performance at a Glance
The momentum of the economy can be understood by observing the production capacity of various sectors. The current statistics show a massive jump in manufacturing and service sectors, although the agriculture sector is witnessing a somewhat sluggish pace.
Below are the projected growth rates for various sectors:
| Sector | Growth Rate (Estimate) | Remarks |
|---|---|---|
| Manufacturing | 7% | Significant improvement compared to last year (4.5%). |
| Services | 9.1% | The largest part of GDP and the strongest growth. |
| Construction | 7.1% | Benefit of infrastructure development. |
| Agriculture | 3.1% | Growth rate is comparatively slow. |
Drivers of Economy: Demand and Investment
Not just from the production side, momentum has also picked up from the expenditure side. The growth can be analyzed based on how the people and the government of the country are spending:
- Private Consumption: About 55% of the GDP comes from the purchases and expenses of common people. A growth of nearly 7% is being seen in this sector, proving that people’s purchasing power and demand are increasing.
- Investment: There is a possibility of a 7.8% increase in investment in new factories and businesses in the country.
- Government Spending: Government expenditure on infrastructure and other developmental works may increase by 5.2%.
International organizations like the RBI and the Asian Development Bank (ADB) have also supported this growth forecast for India. According to them, the simplification of the GST system and tax cuts have increased the Disposable Income in people’s hands, which is boosting the economy.
Future Risks and Challenges
Although these statistics are extremely promising, certain international and domestic issues could create obstacles in the economy’s path:
- Global trade slowdown and political tensions between various countries.
- Uncertainty regarding tariffs with the US.
- Fluctuations in currency value and lower-than-expected yields in the agriculture sector.
When the Finance Minister presents the budget on February 1st, these statistics will be her main tool. It remains to be seen how the government maintains this 7.4% growth rate and overcomes the weaknesses in the agriculture sector.
