Context:
The Union Government, through the First Advance Estimates (FAE) released by the Ministry of Statistics and Programme Implementation (MoSPI), has projected India’s real GDP growth at 7.4% for FY 2025–26, despite concerns over U.S. tariff hikes and slowing domestic consumption.
Key Highlights:
- Government Growth Projections
- Real GDP growth: 7.4% (up from 6.5% in FY25)
- Nominal GDP growth: 8%
- RBI projection: 7.3% for FY26 (Q3: 7%, Q4: 6.5%)
- Sectoral Trends
- Mining & Quarrying: Expected to contract by 0.7% (vs 2.7% growth in FY25)
- Tertiary (Services) Sector: Strong acceleration to 9.1% (from 7.2%)
- Gross Fixed Capital Formation (GFCF): 7.8% growth (vs 7.1%)
- Consumption & Demand
- Private Final Consumption Expenditure (PFCE): Projected at 7%, slightly lower than 7.2% in FY25
- Indicates moderation in consumer demand
- External Sector Concerns
- 50% U.S. tariff impacts labour-intensive exports such as:
- Apparel
- Textiles
- Engineering goods
- Growth Pattern
- Strong first half: Q1 (7.8%), Q2 (8.2%)
- Second half projected slowdown to 6.8%
Relevant Prelims Points:
- First Advance Estimates (FAE):
- Released by MoSPI
- Used in Union Budget calculations
- Provide early macroeconomic assessment
- GDP (Gross Domestic Product):
- Measures total value of goods and services produced within a country
- Nominal vs Real GDP:
- Nominal GDP: Includes inflation
- Real GDP: Adjusted for inflation
- Gross Fixed Capital Formation (GFCF):
- Indicator of investment activity
- Reflects infrastructure and capital expansion
- Private Final Consumption Expenditure (PFCE):
- Proxy for household consumption demand
- Tariffs:
- Taxes imposed on imports/exports
- Used as a trade policy tool
Relevant Mains Points:
- Growth Amid Global Uncertainty
- India’s resilience despite:
- Protectionist trade measures
- Slowing global demand
- Shows strength of domestic demand and services sector
- Structural Composition of Growth
- Growth increasingly driven by:
- Services (tertiary sector)
- Investment (GFCF)
- Concerns:
- Weak mining output
- Moderation in consumption
- Impact of U.S. Tariffs
- Labour-intensive MSME sectors vulnerable
- Potential:
- Job losses
- Export slowdown
- Highlights need for export diversification
- Fiscal Implications
- FAE crucial for:
- Fiscal deficit calculations
- Debt-to-GDP ratio
- Budgetary allocations
- Macroeconomic Challenges
- Balancing:
- Growth momentum
- Inflation management
- External trade pressures
Way Forward:
- Strengthen domestic demand revival
- Promote export diversification and FTA expansion
- Support MSMEs and labour-intensive sectors
- Sustain public capital expenditure
- Enhance competitiveness through PLI and infrastructure push
UPSC Relevance:
GS 3 – Indian Economy (Growth, Investment, External Sector, Budgeting)
Important for both Prelims (GDP concepts, FAE, macro indicators) and Mains (Growth sustainability, trade shocks, structural reforms)