Eco Survey FY26: India’s demand engine back on track, private consumption now doing the heavy lifting

India’s domestic demand is emerging as the main anchor of economic growth in FY26, with private consumption rising to its strongest position in over a decade, according to the Economic Survey 2025-26.

The Survey said the share of Private Final Consumption Expenditure (PFCE) in GDP rose to 61.5% in FY26, marking the highest level since FY12.

That demand strength was also visible through the first half of the year. PFCE grew 7.5% in H1 FY26, while its share in GDP rose to 61.4%. The Survey described this as the fastest growth rate since the first half of FY23 and above the pre-COVID trend.

The Survey linked the consumption uptick to a “supportive macroeconomic environment”, pointing to low inflation, stable employment conditions and rising real purchasing power as key drivers behind stronger household spending.

It added that the pickup appears broad-based, supported by steady rural consumption backed by strong agricultural performance, along with a gradual improvement in urban consumption, helped by the rationalisation of direct and indirect taxes.

Industry and manufacturing sectors boom

While demand is gaining more weight, the Survey’s reading of the supply side also signals steady momentum in core sectors. Industry grew 7.0% in H1 FY26, with manufacturing expanding 8.4%, supported by resilient demand and improved capacity utilisation.

Construction activity also logged 7.4% growth in the first half, underpinned by sustained public capital expenditure and ongoing infrastructure projects, even as mining contracted due to weather-related disruptions.

On the services front, the Survey said the sector, described as the stabilising component of India’s gross value added, was estimated to grow 9.1% in FY26, up from 7.2% in FY25, indicating a further acceleration in services-led expansion.

Services GVA (Gross Value Added) grew 9.3% in H1 FY26, and its share in GDP climbed to 53.6%, surpassing both the previous year and pre-pandemic levels, the Survey noted.