The Budget 2025-26 has set a nominal GDP growth target of 10.1% for FY26, slightly above the 9.7% achieved in the previous fiscal. The Indian economy fell short of expectations in FY25. The Budget had aimed for 10.5% nominal growth, but data released on January 7 revealed a slowdown, with growth slipping to 9.7% — a gap attributed largely to weaker-than-expected performance in the second quarter. Real GDP growth in the September quarter of FY25 dropped to 5.4%, marking a near two-year low and highlighting the challenges ahead.
Achieving the FY26 growth target will be no small feat. Moody’s Analytics recently projected that India’s growth could slow to 6.4% in 2025 due to persistent inflationary pressures and moderating domestic demand. This outlook adds to the skepticism, especially when considering that India’s nominal growth targets have been overestimated in 10 of the past 13 years, according to a Moneycontrol analysis.
For FY25, the government projected a nominal GDP of ₹326.37 lakh crore, but the first advance estimate has revised it down to ₹324.11 lakh crore. This consistent pattern of overestimation isn’t new—barring the four fiscal years between FY20 and FY23, where the gap between budget estimates and actual growth averaged 6 percentage points, other years have shown an average deviation of 0.9%.
Despite these challenges, Finance Minister Nirmala Sitharaman remains optimistic. While presenting the Budget in Parliament, she said, “Our economy is the fastest-growing among all major global economies. Our development track record of the past 10 years and structural reforms have drawn global attention. Confidence in India’s capability and potential has only grown in this period.”
The finance minister also said that the fiscal deficit is estimated to be 4.4 per cent of GDP.
Commenting on this, Anitha Rangan, Economist at Equirus, said: "While adhering to fiscal consolidation, the budget sets a reform-centric longer-term vision by including all stakeholders viz. states, and public private partnership. Fiscal deficit at 4.4% for FY26 and 4.8% balances the fiscal deficit while at the same time, several progressive reforms in agriculture, rural, MSME, employment is constructive."