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India’s real gross domestic product growth has been revised upward to 7.6% for the financial year 2025–26, surpassing the initial advance estimate of 7.4%, according to the second advance estimate released by the Ministry of Statistics and Programme Implementation (MoSPI). This marks the sharpest annual expansion since FY2022, reinforcing India’s position as the fastest-growing major economy in the G20 for the fourth consecutive year.
Main Growth Drivers
The upward revision reflects stronger-than-expected performance across key demand indicators. Private final consumption expenditure accelerated sharply to 7.7%, up from 5.8% in FY25, signalling a meaningful recovery in household spending. Gross fixed capital formation, a proxy for investment activity, remained robust at 7.1%, while government expenditure stayed elevated at 6.6%.
The Reserve Bank of India played a facilitative role by cutting its policy repo rate by 25 basis points to 5.25%, with inflation easing to a historically low level of 2.0% well below the RBI’s 4% target providing the central bank with sufficient headroom to support growth.
Global Context and Headwinds
Despite the strong domestic performance, India is not insulated from global risks. The World Bank, in its April 2026 India Development Update, projected FY27 growth at 6.6%, citing elevated energy prices stemming from Middle East conflict and supply chain disruptions as key downside risks. India’s exports to the United States — its largest trading partner — remain subject to elevated tariffs, though negotiations toward a bilateral trade agreement are ongoing.
India’s forex reserves as of January 2026 covered over 11 months of imports and approximately 94% of the country’s external debt, providing a strong liquidity cushion against external shocks.
Outlook
The Economic Survey 2025–26 projects real GDP growth of 6.8–7.2% for FY2026–27, anchored by domestic consumption and continued capital formation. India’s per capita income has crossed the $3,000 mark in FY25–26, though it remains below the World Bank’s upper middle-income threshold of $13,845, indicating substantial headroom for long-term growth.
The data confirms that India’s growth engine driven by demographics, digital infrastructure, and domestic demand remains structurally intact even as the global environment turns more challenging.
