RBI Raises India’s GDP Growth Forecast to 6.8% for 2025-26 Amid Strong Domestic Demand
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The RBI has raised its forecast for India’s GDP growth to 6.8% for 2025-26, up from 6.5% earlier. This is due to several growth-promoting structural reforms, including GST streamlining, which are expected to offset some external challenges, said RBI Governor Sanjay Malhotra on Wednesday.
He noted that India’s GDP grew strongly by 7.8% in Q1 2025-26. This growth was driven by strong private consumption and fixed investment. On the supply side, gross value added (GVA) grew 7.6%, led by manufacturing revival and steady expansion in services. High-frequency indicators show that economic activity remains resilient. Rural demand is strong due to a good monsoon and healthy agriculture. Urban demand is gradually recovering, the RBI Governor added.
“Considering all these factors, real GDP growth for 2025-26 is now projected at 6.8%, with Q2 at 7.0%, Q3 at 6.4%, and Q4 at 6.2%,” Malhotra explained.
He also said the global economy has been more resilient than expected in 2025, with strong growth in the US and China.
However, the outlook has some uncertainties. Inflation in some advanced economies remains above target, creating challenges for central banks. Financial markets have been volatile. The US dollar strengthened after higher US growth numbers for Q2, and treasury yields rose. Equities remained strong in many advanced and emerging economies.
The RBI Governor said that revenue expenditure by the Union and state governments grew strongly from April to July. Investment activity remains steady, supported by healthy growth in construction indicators like cement production and steel consumption, although production and imports of capital goods slowed slightly. Manufacturing is recovering, and services activity is maintaining momentum.
Looking ahead, an above-normal monsoon, good progress of kharif sowing, and sufficient reservoir levels are expected to boost agriculture and rural demand. Services sector growth and steady employment support overall demand, which should further improve with GST rate rationalisation. Rising capacity utilisation, favorable financial conditions, and improving domestic demand are expected to support fixed investment.
However, ongoing tariff and trade policy uncertainties could affect external demand for goods and services. Prolonged geopolitical tensions and volatility in international financial markets, caused by risk-averse investor sentiment, also pose risks to the growth outlook, the RBI Governor added.
