GDP growth in FY26 expected at 7.4% despite US tariff troubles, Pg1

Key Highlights:

• India's real GDP growth is projected to rise to 7.4% in FY26, up from 6.5% in 2024-25.
• The growth is attributed to a rebound in the manufacturing sector, expected to grow at 7%.
• Nominal GDP growth is expected to fall to a five-year low of 8%.
• In rupee terms, the nominal GDP in 2025-26 is estimated at Rs 357 lakh crore, or $3.97 trillion.

Detailed Insights:

• The projected 7.4% real GDP growth surpasses initial analyst expectations, including those of the RBI.
• The first advance estimates suggest a growth slowdown to around 6.8% in the second half of FY26, potentially due to reduced government spending and US tariffs.
• The services sector is expected to grow at 9.1% in 2025-26, driven by trade, hotels, transport, communication, finance, real estate, and public administration.
• Nominal GDP growth is projected at 8%, lower than the 10.1% assumed in the Union Budget, potentially impacting government debt/deficit dynamics.
• A new series of GDP estimates with 2022-23 as the base year, along with a new CPI series with base year 2024, will be released soon to address criticisms of current estimates.

Key Concepts Involved:

• Real GDP: GDP adjusted for inflation, reflecting the actual value of goods and services produced.
• Nominal GDP: GDP at current prices, without adjusting for inflation.
• Tariffs: Taxes imposed on imported goods, often used to protect domestic industries.