India’s economic outlook has received a significant upgrade as India Ratings and Research (Ind-Ra) revised its FY26 GDP growth projection upward to 7%, reflecting improved domestic momentum and subdued external risks. This upward revision from the earlier estimate of 6.3% (made in July 2025) aligns with India’s strong economic performance in the April–June quarter (Q1 FY26), where GDP surged by 7.8%, the fastest growth in five quarters.
Key Highlights of the Revised Forecast
1. Upward Revision from 6.3% to 7%
Ind-Ra’s latest projection is a 70 basis point increase from its earlier estimate. The rating agency attributed this to,
- Faster-than-expected Q1 GDP growth.
- Less severe impact from the US tariff hikes than previously anticipated.
2. Strong Q1 FY26 Performance
- India’s real GDP grew by 7.8% YoY in Q1 FY26, backed by solid domestic demand, manufacturing resilience, and investment activity.
3. Official GDP Data for Q2 Awaited
- The second quarter (Q2: July–September) GDP figures are due for release on 28 November 2025, which will further determine the trajectory of FY26 economic expansion.
Domestic and Global Context
Global Challenges
- US Tariff Hikes: Since late August 2025, the US imposed unilateral tariff increases across global trade partners, including India.
- Indian Exports Decline: Exports to the US declined by 11.9% in September and 8.9% in October 2025, compared to the same months in 2024.
Despite this, exports averaged $7.4 billion/month between April–October, compared to $7.2 billion/month in FY25—indicating some resilience.
Domestic Tailwinds
- Rapid disinflation boosting real rural wages.
- GST rationalisation, improving consumer sentiment.
- Strong private consumption, with PFCE expected to grow 7.4% in FY26, up from 7.2% in FY25.
Balanced Risk Outlook
Ind-Ra noted that FY26 growth risks are evenly balanced. Growth could exceed 7% if,
- India and the US strike a bilateral trade deal.
- Favourable weather supports agricultural output.
- However, a slower-than-expected revival in consumption and investment could weigh down the economy.
RBI and Government Projections
- The RBI’s estimate for FY26 GDP growth stands at 6.8%, slightly lower than Ind-Ra’s revised figure but higher than 6.5% in FY25.
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