The Indian economy presents a mixed picture for the upcoming fiscal year 2025-26, according to the first advance estimates. While key sectors like manufacturing show strong momentum, others like mining face a contraction, painting a scenario of resilient but uneven growth.
Robust Industrial Performance Amidst Sectoral Shifts
The manufacturing sector is estimated to grow by a robust 7% in 2025-26, a significant acceleration from the 4.5% growth recorded in the previous fiscal year. This indicates a strong revival in factory output and industrial activity. Similarly, the construction sector continues its healthy expansion, projected to grow at 7%, though this marks a moderation from the sharper 9.4% increase seen in 2024-25.
However, not all sectors share this positive outlook. The crucial agriculture sector is estimated to grow at a slower pace of 3.1% in FY26, down from 4.6% in the last fiscal year. A more concerning trend is visible in mining, which is expected to contract by 0.7%, a stark reversal from the 2.7% growth it posted previously.
Demand Dynamics: Government Spending and Exports Hold Fort
Analysing the demand side, experts point to a relatively flat aggregate demand scenario. Soumya Kanti Ghosh, Group Chief Economic Adviser at the State Bank of India, highlighted the key contributors. Government consumption expenditure, with a real growth of 5.2%, has provided positive impetus. Exports have also played a crucial role, holding strong with a positive growth rate of 6.4%.
On the other hand, private consumption growth, a major pillar of the economy, was a tad lower at 7.0%. Ghosh suggested this could be linked to the slowdown in the agriculture sector, which impacts rural incomes and spending. Despite this, per capita consumption registered a respectable growth of 6.1%.
Overall Economic Growth and Outlook
In nominal terms, which accounts for inflation, the Gross Domestic Product (GDP) is estimated to grow by 8% in 2025-26. This figure is crucial for budget calculations and understanding the economy's money-value expansion.
Ghosh summarised the FY26 outlook by noting that an uptick in government consumption and continued traction in services have helped sustain overall demand. This has been essential in cushioning the economy against external global headwinds. The estimates underscore an economy in transition, where strategic government spending and export resilience are balancing out weaknesses in primary sectors and moderating private consumption.
