Nominal GDP growth may miss FY26 target
What's the story
India's Chief Economic Adviser (CEA) V Anantha Nageswaran has warned that the country's nominal Gross Domestic Product (GDP) growth for FY26 could fall short of the Budget estimate of 10.1%. This is mainly due to low inflation expectations. However, he remains optimistic about achieving the real GDP growth target of 6.3-6.8% for the current fiscal year, despite a steep US tariff on Indian shipments.
Economic indicators
'Some shortfall in nominal GDP growth may be there'
Nominal GDP accounts for price changes due to inflation, reflecting the overall price level in an economy. On the other hand, real GDP is an inflation-adjusted measure that assesses the value of all goods and services produced in a country over a specific period. Nageswaran said, "Some shortfall in nominal GDP growth may be there. I think there is a higher chance of that happening."
Economic relief
Low inflation expectations due to good kharif harvest
Nageswaran attributed the low inflation expectations to a good kharif harvest and the recent GST reforms approved by Finance Minister Nirmala Sitharaman. He said, "As the effects of the GST relief and the higher disposable income coming from lower inflation... kick in and boost household and domestic consumption in general, some pricing power may return." However, he added that overall inflation will remain contained.
Economic transformation
'Radical overhaul of GST structure will have substantial impact'
Discussing the impact of GST reforms on GDP, Nageswaran said it would be difficult to quantify at this point. He added that much will depend on consumer response and any uncertainty related to external trade. However, he is confident that this radical overhaul of the GST structure will have a substantial impact on both B2C and B2B transactions in the economy.
Trade challenges
High growth momentum likely to continue in Q2
Nageswaran said the high growth momentum seen in Q1 of the current fiscal is likely to continue in Q2, albeit with a downward bias due to high US tariffs. He added that while the trade impasse with the US continues for now, it will have some impact in Q2 as higher tariffs on Indian shipments came into effect from August.