RBI GDP Growth 2025: Central bank raises FY26 growth forecast to 7.3%

Synopsis
The Reserve Bank of India’s Monetary Policy Committee (MPC) has raised India’s GDP growth forecast for FY2025-26 to 7.3%, up from 6.8%, following stronger-than-expected economic performance. In the July–September quarter, GDP grew 8.2%, a six-quarter high driven by robust consumer demand boosted by GST rate cuts. The economy grew 6.5% in FY25.
The Reserve Bank of India’s rate-setting Monetary Policy Committee (MPC) on Friday revised India’s GDP forecast for FY2025-26 upwards to 7.3%, compared with the earlier estimate of 6.8%.
For Q3 FY26, the central bank raised its growth estimate to 7.0% from 6.4%. The forecast for Q4 FY26 was also raised to 6.5% from 6.2%. Similarly, the projection for Q1 FY27 was raised to 6.7% from 6.4%, while growth for Q2 FY27 was projected at 6.8%.
The revisions follow stronger-than-expected GDP growth in the September quarter. India's economy sparkled in the July-September period as it posted six-quarter high 8.2% growth, riding a surge in consumer demand fuelled by the reduction in goods and services tax (GST) levies toward the fag end of the three months.
The MPC also announced a 25 basis points reduction in the policy repo rate, bringing it down to 5.25 per cent.
GDP had grown 7.8% in the preceding quarter and 5.6% in the same quarter last fiscal, suggesting a statistical boost as well from the low base.
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The Indian economy expanded 6.5% in FY25.
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Strong agriculture performance and easing inflation is boosting rural consumption growth and has brightened the scope of strong consumption growth in the second half as well and is expected to continue at least in the first half of FY27, said DK Pant, chief economist at India Ratings and Research (Ind-Ra).
India-US trade deal on the horizon
The US has imposed a 50% tariff on India, including a 25% penalty for importing Russian oil. The two countries are currently negotiating a trade deal.
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A US-India trade deal could lift growth to around 8%, according to Gaura Sengupta, chief economist at IDFC First Bank.
"The tailwind is the goods and services tax (GST) push which can negate and go beyond. This needs to be monitored going ahead," Sabnavis said. Effective September 22, the GST Council approved a two-slab structure of 5% and 18%, which lowered taxes on several household goods and durables.
India’s Chief Economic Advisor V Anantha Nageswaran earlier said, the government will continue to monitor the global environment but he thinks in the current uncertain global environment, the Indian economy does stand out as a relative oasis of tranquillity, stability and growth.
The statistics ministry, which is revising the GDP base year to 2022-23 from 2011-12, noted that quarterly estimates will be updated due to methodology changes, new data sources, and revised benchmarks.
India to become 4th largest economy
India is set to become the world’s fourth-largest economy by the end of 2025 (FY 2025-26), according to the International Monetary Fund’s (IMF) World Economic Outlook (WEO) report released in April.
A few years ago, India overtook the United Kingdom to become the fifth largest, and is now well on its way to rise to the fourth spot in the list of the top 10 largest economies in the world by overtaking Japan.
In just 11 years, India has surged from the world’s 10th to the 4th largest economy — a remarkable trajectory driven by sustained growth and strategic reforms under the NDA government.
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