Budget 2026: Real economic growth rate explained: The number that truly shows how India’s economy is doing

As attention turns to the Union Budget 2026, one number closely watched by policymakers, investors, and citizens alike is the real economic growth rate. It tells us whether the economy is genuinely expanding or merely appearing to grow due to rising prices. Budget decisions on spending, taxation, and reforms are largely shaped by this real growth outlook, making it a key metric to understand this year’s Budget priorities.

What is real economic growth rate?

The real economic growth rate measures how much an economy grows after adjusting for inflation. Unlike nominal growth, which includes the effect of price increases, real growth shows the actual rise in production of goods and services. This makes it the most accurate indicator of improvements in economic activity and living standards.

How is Real Growth calculated in India?

In India, real economic growth is measured through the growth in Gross Domestic Product (GDP) at constant prices. Nominal GDP, on the other hand, reflects current prices.

Real GDP removes inflation by using a fixed base year. The percentage increase in real GDP from one year to the next is the real economic growth rate.

Why real growth matters more than nominal growth?

High nominal growth can be misleading if inflation is also high. For example, if GDP grows by 10% but inflation is 6%, real growth is only about 4%. Real growth shows whether people are actually producing and consuming more, and whether incomes are rising in real terms.

How is it related to Budget?

The Union Budget 2026 will be framed around expected real growth levels. A strong real growth outlook allows the government to push capital expenditure, job creation, and welfare spending, while weaker growth may call for stimulus measures or tax relief. Revenue projections, fiscal deficit targets, and reform priorities are all built on real growth estimates. This makes the figure central to understanding the Budget’s economic strategy.