India’s FY26 GDP Growth Could Hit 6.8% If External Challenges Don’t Worsen: DEA Secretary Ajay Seth
GDP Growth: India’s economy is poised for strong growth in the upcoming financial year, with GDP expansion projected to be between 6.3% and 6.8% in FY26, according to Economic Affairs Secretary Ajay Seth. If external headwinds remain manageable, India could achieve growth closer to the upper limit of this range, he stated in an interview with Moneycontrol.
Optimistic Outlook for FY26 Growth
Seth’s comments align with the Economic Survey 2024-25, which forecasts India’s real GDP growth in the 6.3% to 6.8% range for FY26. The key takeaway from his statement is that proactive economic measures and a stable global environment could push the growth rate toward the higher end of the spectrum.
“In fact, with some of the measures being announced and if external headwinds don’t become stronger, perhaps we can be nearer to the upper limit (6.8%) rather than towards the lower limit (6.3%),” Seth said.
For the current fiscal year (FY25), India’s economy is expected to grow at 6.4%, based on first advance estimates released by the government on January 7, 2025.
Nominal GDP Growth & Inflation Outlook
Alongside real GDP growth, nominal GDP growth for FY26 is projected at 10.1%, with the government factoring in a GDP deflator (a measure of inflation) below 4%. This assumption reflects expectations of moderate inflation trends, both in the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).
Seth highlighted that the Finance Ministry has taken a conservative approach to nominal GDP projections, ensuring that key fiscal indicators like the fiscal deficit and debt-to-GDP ratio remain stable.
“We had assumed 10.5% nominal GDP growth for the current year (FY25), but now we realize it will be lower at 9.7%. So that our fiscal deficit numbers and debt-to-GDP ratio do not see major variations, we opted for a conservative 10.1% nominal GDP target for FY26,” he explained.
Key Factors Driving India’s GDP Growth
Several domestic and global factors will influence India’s economic trajectory in FY26:
1. Government Policies & Reforms
The Union Budget 2025-26 is expected to introduce key policy measures aimed at boosting infrastructure spending, supporting the manufacturing sector, and strengthening digital and financial inclusion.
2. Investment & Capex Cycle
India’s private and public sector investments are witnessing steady growth, particularly in areas like renewable energy, digital infrastructure, and electric mobility. A revival in the corporate capex cycle will further drive GDP growth.
3. Global Economic Trends & Trade
India’s exports could see fluctuations depending on global demand, geopolitical stability, and trade policies. A resilient services sector, particularly in IT and fintech, will help sustain economic momentum.
4. Inflation & Interest Rates
With inflation under control and interest rates remaining stable, the Reserve Bank of India (RBI) is expected to maintain a balanced monetary policy, supporting economic growth without fueling excessive inflation.
Financial Ratios & Key Economic Indicators
The following table summarizes key financial and economic indicators for FY25 and FY26:
| Indicator | FY25 Estimate | FY26 Projection |
|---|---|---|
| Real GDP Growth | 6.4% | 6.3% – 6.8% |
| Nominal GDP Growth | 9.7% | 10.1% |
| GDP Deflator | < 4% | < 4% |
| Fiscal Deficit Target (% of GDP) | 5.8% | 5.1% |
| CPI Inflation | ~5.4% | ~4.8% |
| WPI Inflation | ~2.0% | ~2.5% |
| Interest Rate (Repo Rate) | 6.5% | 6.25%-6.5% |
| Debt-to-GDP Ratio | ~81% | ~80% |
Conclusion
India’s economic growth outlook for FY26 remains strong, with GDP expansion projected to be closer to 6.8%, provided external risks do not escalate. The government’s cautious approach to nominal GDP projections, alongside stable inflation and investment-driven growth, will play a key role in shaping India’s economic future.
As the global economy navigates uncertain terrain, India’s resilient domestic demand, policy support, and infrastructure push could ensure steady economic momentum in FY26 and beyond.
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