GDP · Sectors

GDP 7.8% in Q1 FY26: Real vs Nominal Story — Why Markets Shrugged

Headline real GDP popped 7.8%, while nominal growth cooled to 8.8%. Here’s what the deflator did, how sectors split, and why equities looked past the print.
By bataSutra Editorial · September 1, 2025
In this piece:
  • The numbers: GDP, GVA, and key sector growth
  • Real vs nominal: the deflator effect in plain English
  • Why markets weren’t euphoric
  • What to watch ahead (inflation, policy, earnings)

The short

  • Q1 FY26: Real GDP +7.8% YoY (₹47.89 lakh cr); Nominal +8.8% (₹86.05 lakh cr). Real GVA +7.6%.
  • Sector split (real GVA): Services led (~9.3%); manufacturing ~7.7%; construction ~7.6%; mining −3.1%; utilities ~0.5%.
  • Deflator math: A soft deflator (low inflation) lifted the real print vs nominal — good for volumes, less exciting for revenues and tax math.
  • Markets’ mood: Mixed — real beat vs slower nominal and a shaky global backdrop (tariff noise, weak rupee).

The numbers that matter

Per the official release, real GDP in Q1 FY26 was ₹47.89 lakh crore (+7.8% YoY); nominal GDP was ₹86.05 lakh crore (+8.8% YoY). Real GVA grew 7.6% with services at 9.3%, manufacturing 7.7%, construction 7.6%, mining −3.1%, and utilities +0.5%.

Expenditure lens

  • PFCE (real): +7.0% YoY (consumption steady).
  • GFCF (real): +7.8% (investment resilient).
  • GFCE (nominal): +9.7% (govt spend re-accelerated).

Sector lens

  • Services: +9.3% — trade/transport and finance/real estate drove gains.
  • Industry: +7.0% — manufacturing +7.7%, construction +7.6%.
  • Primary: +2.8% — agriculture +3.7% but mining −3.1%.

Real vs nominal — the deflator story

“Real” GDP strips out price changes. When inflation (the deflator) is soft, the gap between nominal and real narrows — real looks strong even if companies aren’t seeing big invoice-level price growth. That’s Q1 FY26: 8.8% nominal with a soft deflator lifted the 7.8% real print. Remember: nominal growth drives revenues, taxes, and leverage ratios — key for markets and the Budget math.

Why markets shrugged

  • Nominal cooldown: Slower nominal growth → softer revenue tailwind vs prior quarters.
  • Macro noise: Tariff overhang and a weak rupee kept risk appetite guarded.
  • Mixed tape: Indices swung around the data; the prior week’s risk-off tempered enthusiasm even as some sessions bounced.

Investor lens Markets often pay more attention to nominal growth and earnings revisions than to real GDP alone.

What to watch next

  1. Inflation & deflator path: If inflation re-accelerates, the deflator could push nominal up (helping revenues) even if real eases.
  2. Policy: RBI stance vs rupee volatility; fiscal math as nominal evolves.
  3. Earnings breadth: Whether services strength offsets industrial softness (mining, utilities).