New Delhi: India’s government has projected India economic growth 2026 at 7.4% in real GDP for the fiscal year 2025-26. The forecast issued by the National Statistics Office on January 7, 2026, highlights strong domestic demand. This comes despite the potential impact of US tariffs on India’s exports.
The projection signals resilience in Asia’s third-largest economy. It could bolster regional stability by supporting trade ties with neighbors like Pakistan, Bangladesh, and Sri Lanka. Higher growth may enhance investment flows across South Asia amid global uncertainties.
India GDP Forecast 7.4% Driven by Services
The India GDP forecast of 7.4% stems from the buoyant performance of the services sector. Real gross value added grew 7.3%, led by financial and real estate services at 9.9%. The trade, hotels, transport, and communication sectors expanded by 7.5%.
Manufacturing achieved 7.0% growth, up from 4.5% last year. Construction also declined to 7.0%, down from 9.4%. Agriculture-related activities grew 3.1%, while electricity, gas, and water supply rose 2.1%.
Private final consumption expenditure increased 7.0%. Gross fixed capital formation rose 7.8% from 7.1%. Government spending increased by 5.2% compared to 2.3% previously.
The nominal GDP reaches INR 357.14 lakh crore with 8.0% growth. This exceeds the prior year’s INR 330.68 lakh crore.
US Tariffs on India Impact Assessed
Analysts note that US tariffs on India could impact exports. Proposed hikes by the US administration target key sectors like textiles and pharmaceuticals. Yet the India GDP forecast 7.4% assumes limited disruption so far.
Exports face risks from global trade tensions. However, domestic drivers mitigate effects. Reforms under Prime Minister Narendra Modi aim to counter tariffs through enhanced local production.
The projection assumes steady exports despite uncertainties. If tariffs escalate, India’s economic growth forecast for 2026 may be adjusted downward in subsequent revisions.
India Fiscal Deficit Target Maintained
The government upholds its fiscal deficit target for India at 4.4% of GDP for 2025-26. This equals INR 15.7 trillion. It follows a revised 4.8% in 2024-25.
Fiscal prudence supports the India GDP forecast of 7.4%. A lower deficit aids in borrowing costs and investment. Capital expenditure remains prioritised to fuel growth.
By November 2025, the deficit had reached 62.3% of the annual goal. This rose from prior years due to higher spending. Yet, substantial tax revenues keep the target achievable.
Background
India’s economy expanded by 6.5% in 2024-25, following a 9.2% growth rate in 2023-24. The slowdown was reflected in global headwinds, including inflation and supply chain issues.
Post-pandemic recovery focused on infrastructure. Initiatives like Make in India boosted manufacturing. Services dominate at over 50% of GDP.
The South Asian context shows India’s lead. Neighbours grapple with debt and instability. India’s stability aids regional supply chains.
Previous forecasts varied. The Reserve Bank of India pegged 7.3% in December 2025. International agencies, like the IMF, estimated 6.6% for 2025.
The first advance estimates utilize indicators such as industrial production and GST collections up to November 2025.
What’s Next for India Economic Growth 2026
Revisions are scheduled for February 27, 2026, with the release of the second advance estimates. The federal budget on February 1, 2026, will incorporate this data.
The base year update to 2022-23 may alter the figures. Further data on crops and corporate results refine projections.
If US tariffs on India intensify, policy shifts could follow. Trade deals with the US remain possible. Stakeholders monitor global events. Stable oil prices and remittances support the outlook. The India GDP forecast of 7.4% underscores domestic strength. Yet external risks persist.
Economists expect sustained momentum. Private investment revival is key. The forecast positions India as a growth engine. It counters slowdown fears. Ongoing reforms target efficiency. Digital adoption aids sectors.
India’s economic growth in 2026 depends on the implementation of balanced policies. Fiscal discipline remains crucial. The projection boosts confidence. It aligns with long-term goals. South Asia benefits from spillover effects. Trade pacts could amplify gains.
The Indian fiscal deficit target supports stability. Lower borrowing fosters investment. US tariffs on India impact requires vigilance. Diversification mitigates risks. India’s economic growth in 2026 at 7.4% reflects its resilience. Future updates will clarify the trajectory.
Published in SouthAsianDesk, January 8th, 2026
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