India may pencil in a nominal growth rate of around 10 per cent in the forthcoming budget for fiscal year 2026-27, marking a notable increase from an estimated 8 per cent for the current fiscal year, Economic Times reported, citing an official familiar with early budget deliberations.
The projection comes as Finance Minister Nirmala Sitharaman prepares to present the Union Budget on 1st February.
The revised estimate reflects a significant adjustment from the government’s earlier assumptions.
Budget estimates for FY 2025-26 had anticipated nominal GDP growth of 10.1 per cent, but actual performance has tracked closer to 8 per cent due to subdued inflation and lower price growth.
Nominal GDP, which combines real economic expansion with inflation, serves as a critical baseline for calculating fiscal deficit targets, tax revenue projections and debt-to-GDP ratios.
Analysts have projected that nominal GDP could show annual growth of 9 per cent in FY26, followed by 9. 5 per cent in FY27 and 10 per cent thereafter, assuming incremental fiscal consolidation continues.
The subdued nominal growth in the current year has created pressure on gross tax revenues, which expanded by just 4 per cent in the first seven months of FY26, well below the budget target requiring 22. 3 per cent growth in the remaining months.
The improved nominal growth projection for 2026-27 would provide the government with greater fiscal space for policy initiatives whilst maintaining its commitment to reduce the fiscal deficit.
The government has targeted bringing the fiscal deficit down to 4. 4 per cent of GDP in FY 2025-26 from 4. 8 per cent in the previous year.
A higher nominal GDP growth rate would translate into stronger tax collections even at constant tax rates, potentially allowing for both fiscal consolidation and strategic spending increases in areas such as infrastructure, education and rural development.
Real GDP growth for FY 2025-26 has been estimated at 7. 4 per cent, driven primarily by robust performance in the services sector.
Looking ahead to FY 2026-27, private research firm Crisil expects India’s economy to grow at 6. 7 per cent, while the International Monetary Fund projects real GDP growth of 6. 2 per cent for that fiscal year, moderating from the current year’s stronger performance amid global trade uncertainties.
