The upcoming Union Budget is likely to peg India’s nominal GDP growth rate at 10.4% for the next financial year, higher than the 9.7% forecast for FY2025, according to an FE poll of 16 economists. be.
They believe that a nominal GDP growth rate of 10.4% will be enough for the government to keep its fiscal deficit target for fiscal 2026 below 4.5% of GDP.
Most economists say that nominal GDP growth in fiscal 2026 is likely to pick up primarily due to higher inflation rather than an expansion in real GDP. “An increase in WPI inflation next year will primarily boost nominal growth,” said Vivek Kumar, economist at Quanteco Research.
Kumar expects WPI inflation to rise to 3.5% in FY26 from 2.5% this year. During the first nine months of 2025, WPI inflation averaged 2.2%.
Indranil Pan, chief economist at Yes Bank, expects nominal GDP growth to be 9.5% due to lower inflation expectations. Mr. Pang expects real GDP growth to be 6.6% in FY2026, with a deflator of 2.9%.
The fiscal year 2025 budget set the country’s nominal GDP growth rate at 10.5%, but the National Statistics Office (NSO)’s first preliminary estimate of 9.7% is mainly due to a slower-than-expected slowdown in real economic growth. It is something. Economists say it’s the GDP growth rate.
NSO expects real GDP growth to slow to 6.4% in FY25 from 8.2% in FY24, mainly due to lower manufacturing activity and government capital spending.
In the coming fiscal year, economists say, normalization of nominal GDP, higher revenues as consumption recovers and rationalization of subsidies will give the government much-needed space to reduce deficit levels.
DK Pant, Chief Economist at India Ratings and Research, said: “Despite the slowdown in growth in FY25 and the possibility of slight growth improvement in FY26, Indo-Ra is still on track for the government’s fiscal consolidation roadmap.” We hope that they will comply with this.”
“I think the government has a chance of achieving its goal of reducing the budget deficit to less than 4.5% in fiscal 2026,” he added.
The fiscal deficit in FY2025 is also likely to be slightly lower than the budgeted 4.9%, on the back of lower-than-expected capital expenditure by the Center. Analysts expect capital expenditure for FY25 to be around Rs 1-1.1 billion below the budgeted target.
Analysts say that if the government intends to bring down central government debt to 50-51% of GDP, it will need to gradually reduce the fiscal deficit to a level of 3-3.5% of GDP over the next three to four fiscal years. It states that there is. GDP from 2029-30. “This forecast is based on the assumption that nominal GDP growth will average close to 10.5% from FY27 to FY30,” HDFC Bank economists said in a report.
