The projection is in line with HDFC’s own forecast and slightly above the Reserve Bank of India’s estimate of 7.3% for FY26. Data released by the government on Wednesday projected the nation’s GDP expansion at same rate, as well.
On the supply side, gross value added (GVA) is estimated to grow 7.3%, according to the report.
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While real growth remains strong, nominal GDP growth is pegged at 8.0%, reflecting a very low GDP deflator of 0.5%, HDFC said.
Growth slows in H2
The report points to a clear moderation in growth in the second half of the year.
GDP growth in H2 FY26 is estimated at around 6%, down from nearly 8% in H1, largely due to a high base effect, seasonal factors and lower government spending as authorities work towards fiscal targets. Weak inflation prints have further compressed nominal growth, which is estimated at 7.3% in H2, compared with 8.8% in the first half.Also Read | GDP growth to slip to 6.8% in FY27, limited scope for rate cuts: Report
However, HDFC cautioned that the advance estimates are based on extrapolations of data available until November and may be revised as more information emerges.
The upcoming release of the new GDP series later this month could also lead to changes in sector-level assessments.
On the fiscal side, HDFC said the moderation in nominal growth, combined with income tax and GST cuts, is likely to lead to a revenue shortfall of Rs 1.5–2 lakh crore in FY26. Although, the impact on the government’s fiscal math is expected to remain manageable, aided by spending rationalisation and a higher dividend transfer from the RBI, allowing the Centre to stay close to its 4.4% fiscal deficit target for FY26.
What is driving the 7.4% expansion
According to the HDFC report, private consumption is projected to grow 7.0% in FY26, supported by tax relief, interest rate cuts and GST reductions, while gross fixed investment is expected to rise 7.8%, driven largely by continued government capital expenditure.
From the production side, the services sector is forecast to expand 9.1%, remaining the main engine of growth, while manufacturing is expected to grow 7.0%.
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Exports are estimated to increase 6.4%, slightly higher than in FY25, helped by frontloading of shipments to the US, stronger demand from other global markets and sustained momentum in services exports, even as higher US tariffs and rising global protectionism pose key risks.
Looking ahead, HDFC expects GDP growth to moderate to 6.7–6.9% in FY27, mainly due to base effects and a likely increase in the GDP deflator as inflation edges up. On the bright side, this would also lift nominal GDP growth to around 10.1%.