Datanomics: India's nominal GDP growth rate likely to remain subdued

Lower deflators are expected to lift real growth again, offsetting weak corporate numbers and muted nominal expansion

India’s second-quarter gross domestic product (GDP) numbers for 2025-26 (Q2FY26) are scheduled for release on November 28 (Friday), with most economists projecting a real economic growth rate of  7–7.6 per cent. If they are right, this would be lower than the Q1FY26 GDP growth rate but higher than the rate for most quarters of FY25.  However, this growth may be propelled to a large extent by soft deflators — the inflation rate in a broader sense. As such, the nominal GDP growth rate may remain subdued. 

Low prices keep real growth strong

 

In Q1FY26, the nominal GDP growth rate fell to 8.8 per cent year-on-year from 10.8 per cent in Q4FY25. However, real GDP grew at a higher rate of 7.8 per cent in Q1FY26 compared to 7.4 per cent in the last quarter of FY25 due to low deflators.  

 

Muted inflation also a factor

 

Both wholesale and retail  inflation remained soft in Q1 and Q2 of FY26, although the softness was higher in Q2. This may give a boost to real GDP and GVA growth rates despite an expected subdued nominal growth.  

 

Caution in non-financial companies’ results 

 

Non-financial companies’  results, however, paint a cautious picture. The gross value added (GVA) for BSE-100 firms, measured as the sum of Ebitda (earnings before interest, tax, depreciation, and amortisation) and employee compensation, contracted for the second consecutive quarter in Q2FY26, and at a higher rate.

 

This suggests that manufacturing and certain service segments may not be experiencing a strong rebound yet, which could limit nominal GVA growth in Q2.