The Ministry of Statistics estimates the size of the current year’s GDP, which becomes the starting point for Budget. At this stage, policymakers only frame broad assumptions. Once the GDP estimate is released, the government assumes a certain level of growth in next year’s nominal GDP.
This, in turn, determines how much fiscal deficit is feasible and how much tax growth can be expected. In simple terms, the higher the nominal GDP growth, the higher the potential tax collections.
This makes the first advance estimates from the Ministry of Statistics and Programme Implementation (MoSPI) extremely important.
According to a CNBC-TV18 poll, MoSPI is expected to announce real GDP growth of 7.5%. However, nominal GDP growth is more significant for Budget math. The poll expects nominal GDP growth to be pegged at 8.3%.
In last year’s Budget, nominal GDP growth was assumed at 10.1%. Does this lower growth rate pose a risk to the fiscal deficit? The answer is no.
For FY26, the assumed nominal GDP was at ₹356.97 lakh crore, which was 10.1% higher than the assumed FY25 nominal GDP of ₹324 lakh crore. However, the actual nominal GDP for FY25 came in higher, at ₹330 lakh crore. Because the base was larger, an 8.3% nominal GDP growth still keeps fiscal calculations on track, without the need for any adjustment to the fiscal deficit.
So, what should one focus on next? The key question is the nominal GDP growth assumption for the coming year.
The expectation is that the Budget will assume nominal GDP growth of 9.7% over this year’s 8.3%, taking the GDP size to around ₹392 lakh crore. These, however, remain assumptions.
All of this may change after February 28, when MoSPI is expected to announce a new GDP series with a revised base year. Until then, these numbers remain critically important.
