The First Advance Estimates of National Income for 2025–26 released by the Ministry of Statistics and Programme Implementation (MoSPI) present, at first glance, a picture of macroeconomic stability. Real GDP growth is projected at a respectable 7.4 per cent, suggesting that India continues to be among the world’s fastest-growing large economies. Yet, beneath this reassuring headline lies a set of numbers that are intriguing, puzzling, and potentially worrying.

What is striking—and has attracted surprisingly little attention in public discourse—is the continuous and progressive deceleration in the growth rate of nominal GDP during 2022-23 to 2025-26, the near-convergence of nominal and real GDP growth rate, the repeated divergence between nominal and real Gross Value Added (GVA) across key sectors, and the steady compression of price realization in large parts of the economy. These patterns raise a fundamental question: is India increasingly growing in volume but not in value?

This article seeks to examine what MoSPI’s First Advance Estimates are really telling us, what may be getting obscured by aggregate growth narratives, and why these trends deserve urgent and careful policy reflection.

The Quiet but Relentless Deceleration of India’s Nominal GDP Growth—and Why It Should Concern Us

A steady and uninterrupted fall in India’s nominal GDP growth should worry us because it shows that the economy is losing financial momentum year after year. The numbers tell a clear and unsettling story: nominal GDP growth rate has slowed sharply from a high 18.9% in 2021–22 to 14.0% in 2022–23, further down to 12.0% in 2023–24, then to 9.8% in 2024–25, and now to just 8.0% in 2025–26 as per the First Advance Estimates. This is not a one-off dip but a progressive and continuous deceleration over four consecutive years. Nominal growth is the space within which India generates taxes, incomes, profits, savings, and spending power. As this space shrinks, tax collections naturally lose buoyancy, making it harder for governments—both Union and States—to expand spending on infrastructure, welfare, and human development without straining fiscal balances. Slower nominal growth also means weaker growth in household incomes, which directly softens private consumption in a country where consumption demand is the main engine of growth. What is further worrying is that the nominal GDP growth rate for 2024-25 and 2025-26 are in single digit only, which is quite far from the normal in the Indian economy.

Businesses feel the pressure through slower revenue expansion, thinner margins, and greater uncertainty, leading them to delay investments and hiring. Capital markets sense this loss of momentum early—risk appetite cools, valuations struggle to sustain optimism, and long-term investment plans turn cautious. Banks become more conservative, entrepreneurs more hesitant, and job creation less assured. In simple terms, when nominal growth keeps cooling year after year, the Indian economy does not stumble suddenly—but it gradually loses confidence, fiscal room, and spending power, making it increasingly difficult to convert respectable real growth into broad-based prosperity.

The Vanishing Gap Between Nominal and Real GDP: A Quiet Red Flag

One of the most striking features of the 2025–26 estimates is the near-alignment of nominal and real GDP growth. Nominal GDP is projected to grow by 8.0% while real GDP is estimated to expand by 7.4 %—leaving a gap of just 0.6%.

This gap, which broadly reflects the GDP deflator, is the lowest in at least four years. For comparison, the nominal–real growth differential stood at around 6.4 % in both 2022–23, declining to 2.8%, in 2023–24, eased marginally to 3.3% 2024–25, and has now sharply compressed in 2025–26 to 0.6%.

For an economy like India, structurally characterized by positive inflation and relative price shifts, such a narrow gap is unusual. It signals not merely low inflation, but weak price realization across output markets. In macroeconomic terms, this suggests that incremental growth is yielding diminishing nominal value.

Why Subdued Nominal GDP Growth Matters More Than It Appears

Nominal GDP growth has remained below double digits for two consecutive years as mentioned above—9.8% in 2024–25, and 8.0% per cent in 2025-–26, 9.8 per cent in 2024–25, and now just 8.0 per cent in 2025–26. This single digit nominal GDP growth rate for two consecutive years, is not a trivial statistical detail; it is central to how the economy functions.

All economic transactions—consumption, investment, wages, profits, taxes, and debt servicing—operate in nominal terms. When nominal GDP growth rate is subdued for two straight years, several pressures accumulate simultaneously:

– Tax buoyancy weakens, complicating fiscal consolidation.

-Corporate revenue growth lags behind output expansion, squeezing margins.

– Employment generation becomes cost-conscious rather than expansionary.

– The economy’s capacity to absorb debt, public and private, diminishes.

In this context, subdued nominal growth is not a benign outcome of macro stability; it is a binding macroeconomic constraint.

Primary Sector Deflation: Rising Output, Falling Incomes

The estimates for the primary sector in 2025–26 are particularly revealing. Nominal GVA growth for the primary sector is projected at a mere 0.2%, while real GVA is estimated to grow by 2.7%. A similar pattern is evident in agriculture, forestry, and fishing, where nominal GVA growth is placed at 0.8% against real growth of 3.1%.

This divergence points unmistakably to price deflation or severe price compression. Output volumes may be rising, but producers—especially farmers—are not realizing commensurate prices. This is not a story of productivity-led prosperity; it is one of income stress masked by volume growth.

Such trends have far-reaching implications. Weak agricultural price realization depresses rural incomes, dampens consumption demand, and weakens the transmission of growth impulses to the rest of the economy.

Mining, Utilities, and Construction: A Broader Pattern of Nominal Compression

The same phenomenon extends beyond agriculture. In mining and quarrying, nominal GVA growth lagged real growth in 2024–25 and turned sharply negative in 2025–26, with nominal GVA contracting by 6.0% against a much milder real contraction of 0.7%
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Electricity, gas, and water supply sector, also exhibit repeated instances where nominal GVA growth rate trails real GVA growth rate both during 2024-25 and 2025-26. These sectors are often characterized by administered prices, regulated tariffs, or tight public expenditure constraints, all of which limit cost pass-through and price realization.

For the construction sector also, for 2025-26, nominal GVA growth rate trailed real GVA growth rate with nominal GVA growth rate of 6.6% and real GVA growth rate of 7.0%. During the previous year, that is 2024-25, both GVA nominal and GVA real growth rates were the same at 9.4%.

The cumulative implication is clear: price compression is no longer sector-specific; it is becoming systemic.

Shrinking Shares of Goods-Producing Sectors: Structure or Stress?

Between 2012-13 and 2025–26, the share of the primary sector in GVA at current prices declined from 21.7% to 19.3%, while the secondary sector’s share fell from 29.3% to 25.3%.

While structural transformation typically involves a declining share of agriculture, the simultaneous erosion of both primary and secondary sector shares—especially in current prices—suggests something more troubling: relative price deflation in goods-producing sectors. Services may be retaining pricing power, but employment-intensive sectors are losing nominal weight even as they carry a large share of the workforce.

The Core Puzzle: Real Growth Without Nominal Traction

Taken together, these patterns reveal a deeper macroeconomic dilemma. India appears to be experiencing real growth without adequate nominal traction. The economy is expanding in quantities but struggling to translate that expansion into incomes, revenues, and fiscal space.
This creates a deceptive comfort: headline growth looks strong, inflation appears contained, and macro stability seems intact. Yet the underlying transmission from growth to welfare, from output to income, and from expansion to fiscal capacity is weakening.

Conclusion: A Policy Question That Can No Longer Be Deferred

The First Advance Estimates for 2025–26 should not be read merely as a statistical update; they should be read as a diagnostic signal. The progressive and continuous deceleration in nominal GDP growth rate during 2022-23 to 2025-26, near-convergence of nominal and real growth, the repeated sectoral deflations, and the decline in the share of both primary and the secondary sector at nominal prices simultaneously, point to a nominal growth problem hiding beneath real growth success.

This does not call for abandoning price stability, nor does it argue for inflationary excess. What it demands is a more balanced macroeconomic framework—one that explicitly recognizes the importance of healthy nominal expansion for income growth, fiscal sustainability, and investment revival.

Ignoring this issue risks locking the economy into a low-nominal-growth equilibrium where growth headlines remain strong, but economic traction steadily weakens.