Govt to opt for conservative GDP estimate in Budget 2025, may peg nominal growth at 9.5%: Report

The conservative 9.5 percent nominal GDP growth estimate for FY26 aligns with a cautious approach.

The government is likely to project a conservative nominal GDP growth estimate of around 9.5 percent for the 2025-26 budget, factoring in expectations of slowing inflation and steady economic activity, The Economic Times reported. The fresh estimate follows recent data indicating slower growth, with real GDP expanding by just 5.4 percent in the second quarter of FY25.

A precise nominal GDP estimate will be determined after the statistics ministry releases its first advance estimate of GDP growth for FY25 in January, said the ET report citing unidentified sources. The approach reflects a preference for realistic budget projections, aiming to exceed targets rather than risk falling short.

Also read | Sanjay Malhotra takes charge as new RBI Governor

The July 2024 budget had projected nominal GDP growth of 10.5 percent for FY25, but with first-half growth at 8.9 percent, analysts expect the full-year figure to fall slightly short unless economic activity rebounds sharply. The conservative 9.5 percent estimate for FY26 aligns with a cautious approach.

The real GDP growth outlook presents additional challenges, Moneycontrol wrote earlier last week. Economists noted that achieving a full-year real GDP growth of 7 percent—marking a fourth consecutive year of robust expansion—appears increasingly unlikely. Crisil's Chief Economist DK Joshi remarked that a sharper-than-expected slowdown in Q2 has tilted risks to their FY25 growth forecast of 6.8 percent downward.

With the Indian economy averaging 6 percent real GDP growth in H1 FY25, experts believe reaching the government's lower-end projection of 6.5 percent will be difficult. The slowdown in manufacturing, utilities, mining, and government capex in Q2 contributed to the dampened outlook.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.