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EY has projected India's real GDP growth at 7 to 7.2 per cent in FY27, with nominal GDP growth at 12.5 to 13 per cent.
The drivers are buoyant domestic demand and government capital expenditure, which rose 23.7 per cent year-on-year in Q1 FY27 after a 23.3 per cent contraction in the previous quarter.
Industrial output has picked up sharply: the IIP grew 7.3 per cent in June 2026, a 23-month high, with Q1 FY27 averaging 5.7 per cent.
Wholesale inflation at 9.8 per cent in July is the main risk flagged, against consumer inflation of 4.4 per cent.
The report calls for import substitution and higher domestic value addition, identifying 1,272 goods where imports worth about USD 189 billion could be substituted.
Nominal GDP measures output at current prices; real GDP strips out price change to measure actual volume. The gap between the two is the GDP deflator, an economy-wide measure of inflation. EY expects real growth of 7 to 7.2 per cent but nominal growth of 12.5 to 13 per cent, implying a deflator of over 5 per cent. That is unusual when consumer inflation is only 4.4 per cent, and the explanation is wholesale inflation at 9.8 per cent - the WPI feeds the deflator much more strongly than the CPI does. A higher nominal GDP flatters ratios calculated against it, such as the fiscal deficit and the debt-to-GDP ratio, which is why the government's nominal assumption of 10.04 per cent matters for the Budget arithmetic.
Simple Analogy: If your shop sold the same number of shirts this year but at higher prices, your revenue rises without a single extra shirt leaving the shelf. Nominal GDP counts the revenue; real GDP counts the shirts.
| Feature | CPI (retail) | WPI (wholesale) |
|---|---|---|
| July 2026 reading | 4.4 per cent | 9.8 per cent |
| What it measures | Prices paid by households, including services | Prices of goods in bulk trade, excluding services |
| Compiled by | National Statistical Office, MoSPI | Office of the Economic Adviser, DPIIT |
| Used for | The RBI's inflation target under the flexible inflation targeting framework | Deflating output series and gauging producer cost pressure |
| Main drivers cited in July 2026 | - | Mineral oils, food articles, metals, chemicals and fuels |
GS Paper 3 > Indian Economy > Growth, inflation and fiscal policy
General Awareness > Indian economy, monetary policy and inflation indices
General Awareness > Economy
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Answer: 1, 2 and 3
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Answer: 2 and 3 only
With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct? 1. Acquiring new technology is capital expenditure. 2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure. Select the correct answer using the code given below:
Answer: 1 only
The ratio of nominal to real GDP, an economy-wide price index covering all goods and services produced.
Government spending that creates assets such as roads, railways and plants, as opposed to revenue expenditure on salaries and subsidies.
Purchasing Managers' Index; a reading above 50 signals expansion over the previous month, below 50 contraction.
Replacing imported goods with domestically produced ones to reduce external dependence and the current account deficit.