India Needs Inflation: Nominal GDP is Budget 2026's Real Challenge

• Economists warn that low inflation and sluggish nominal GDP growth are hurting government revenues, corporate earnings, and debt consolidation plans.
• The GDP deflator has fallen to about 0.5%, the lowest in nearly five decades, leading to strong real GDP growth not translating into revenue or corporate earnings.
• JP Morgan's Sajjid Chinoy expects real GDP growth to moderate and nominal GDP growth to remain structurally lower due to global disinflationary forces and China's excess capacity.
• Neelkanth Mishra of Axis Bank is more optimistic, predicting double-digit nominal GDP growth (around 10.5%) driven by a virtuous credit cycle and accelerating loan disbursements.
• Budget 2026 faces the challenge of balancing fiscal consolidation with policies to revive nominal growth without relying on past high inflation.

Why It Matters: India's economic focus shifts to nominal GDP growth as low inflation impacts revenues and corporate earnings.