RBI Raises India’s FY26 GDP Growth Forecast to 7.3%

The Reserve Bank of India (RBI) has revised India’s GDP growth forecast for FY2025–26 to 7.3%, up from its earlier projection of 6.8%. This upward revision follows a strong second-quarter performance and is seen as a reflection of continued domestic demand, policy reforms, and supportive macroeconomic conditions. The announcement was made after the latest meeting of the Monetary Policy Committee (MPC), which also included a 25 basis point repo rate cut — lowering the policy rate to 5.25% to support economic activity.

Key Growth Drivers Behind the Revision

1. Strong Q2 GDP Performance

India’s GDP grew by 8.2% in Q2 of FY25, the highest in six quarters, mainly due to,

• Higher consumer demand during the festive season
• GST rate rationalisation boosting consumption
• Front-loaded capital expenditure by the government
• Easing crude oil prices improving trade and cost structures

2. Policy Support and Reforms

Recent fiscal and monetary measures, including,

• GST structure simplification (now 5% and 18% slabs)
• Tax reductions on key consumer goods
• Improved rural consumption, thanks to better agricultural output
• These measures are contributing to sustained economic activity, especially in the domestic sector.

Updated GDP Forecasts

The RBI’s latest estimates for upcoming quarters and financial years are as follows,

FY26 GDP Growth: Revised to 7.3% (from 6.8%)

• Q3 FY26: Revised to 7.0% (from 6.4%)
• Q4 FY26: Revised to 6.5% (from 6.2%)
• Q1 FY27: Revised to 6.7% (from 6.4%)
• Q2 FY27: Projected at 6.8%

This shows a steady trajectory of economic expansion driven by strong fundamentals and rising domestic demand.

Repo Rate Cut and Monetary Support

The MPC also announced a 25 bps cut in the policy repo rate, bringing it down to 5.25%, to,

• Support credit flow to the productive sectors
• Encourage private investment and consumer spending
• Mitigate the impact of emerging global economic uncertainties
• This decision indicates that the RBI is maintaining a balanced approach, supporting growth while keeping inflation in check.

Domestic and Global Factors

India’s Chief Economic Advisor and the RBI Governor highlighted the country’s resilience amid global economic uncertainties, stating that India remains a “relative oasis of stability and growth.”

Additionally, a potential India–US trade deal and continued global interest in the Indian market are expected to provide further economic tailwinds.

India’s Global Economic Ranking

According to the International Monetary Fund (IMF), India is expected to become the world’s 4th largest economy by the end of FY26, overtaking Japan.

In just over a decade, India has moved from 10th to 4th place, driven by strategic policy reforms, digital transformation, and a robust services sector.

Static Facts

• FY26 GDP Forecast: 7.3% (revised from 6.8%)
• Q2 FY25 GDP Growth: 8.2%
• Repo Rate (Dec 2025): 5.25%
• Policy Committee: Monetary Policy Committee (MPC), RBI
• Base Year for GDP Revision: 2022–23 (to replace 2011–12)
• India’s Global Rank (by FY26): 4th largest economy (IMF WEO 2025)
• GST Reform: Dual slab of 5% and 18% approved in Sept 2025