Budget nominal GDP growth estimate of 10.1% realistic; real GDP to be around 6.5% in FY26, say economists

Nominal growth estimate realistic say economists

The Budget’s nominal GDP growth target of 10.1 percent for FY26 is realistic, economists told Moneycontrol, highlighting that real GDP growth could settle around 6.5 percent for the coming fiscal.

“Average deflator should be around 3.6-3.7 percent and real GDP growth should be around 6.5 percent,” said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank.

The government’s estimate for growth was marginally lower than an MC poll of economists conducted a fortnight before the Budget, which had pegged the median at 10.4 percent.

“We are at 6.5 percent of real GDP growth. The 10.1 percent nominal GDP number is realistic, our estimate was 10.5 percent,” said Gaura Sengupta, chief economist, IDFC First Bank.

The Economic Survey released on January 31 pegged the GDP growth estimate at 6.3-6.8 percent, 20 bps or 0.2 percentage points lower than previous year’s forecast of 6.5-7 percent.

The Indian economy surprised on the downside, as the first advance estimate predicted real growth of 6.4 percent and nominal increase of 9.7 percent in FY25.

The GDP deflator, which measures the difference between real and nominal GDP and is calculated using wholesale and consumer inflation, was likely 3.3 percent for FY25.

India’s consumer inflation is likely to settle higher at 4.8 percent in FY25 compared with an earlier forecast of 4.5 percent.

Wholesale inflation in the first nine months of the year was 2.18 percent.

“We are projecting real and nominal gdp growth in FY26 at 6.5%, and 10.0%, respectively,” said Aditi Nayar, chief economist, ICRA.

The Economic Survey noted that RBI expects consumer inflation, which accounts for nearly 40 percent of weight in the deflator, to settle around 4.2 percent for the coming fiscal.

“This (the government nominal growth number) looks realistic, and we expect the real GDP growth to be 6.6% in FY26,” said Paras Jasrai, senior analyst, India Ratings and Research.