December 4, 2025
Growth estimates for Q3 and Q4 FY26 were revised up to 7.0% and 6.5%
Projections for Q1 and Q2 FY27 were increased to 6.7% and 6.8%
The upgrades follow the July to September quarter’s 8.2% expansion
Strong agriculture, softer inflation, GST cuts and government capex supported first half activity
The Reserve Bank of India’s Monetary Policy Committee raised the GDP growth forecast for FY 2025 26 to 7.3%, up from its earlier estimate of 6.8%. For Q3 FY26, the central bank increased its projection to 7.0% from 6.4%, and for Q4 FY26, it revised the estimate to 6.5% from 6.2%. The projection for Q1 FY27 was lifted to 6.7% from 6.4%, while Q2 FY27 growth is now expected at 6.8%.
RBI Governor Sanjay Malhotra said economic activity in the first half of the financial year benefited from income tax and GST rationalisation, softer crude oil prices, the front-loading of government capital expenditure and supportive monetary and financial conditions alongside benign inflation.
He added that high-frequency indicators showed domestic economic activity held up in Q3, although some leading indicators were beginning to show weakness. GST rationalisation and festival season spending supported domestic demand in October and November.
The revisions follow stronger-than-anticipated GDP growth in the September quarter. India posted an 8.2% expansion in the July to September period, the highest in six quarters, driven by a surge in consumer demand following GST reductions late in the quarter. GDP grew 7.8% in the previous quarter and 5.6% in the same quarter last year, indicating a base effect in the year-on-year comparison. The economy expanded 6.5% in FY25.
DK Pant, chief economist at India Ratings and Research, said strong agricultural performance and easing inflation were lifting rural consumption and were likely to support firm consumption growth in the second half and into at least the first half of FY27.
On the trade front, India and the United States are negotiating a trade agreement at a time when Washington has imposed a 50% tariff on India, including a 25% penalty related to imports of Russian oil. Gaura Sengupta, chief economist at IDFC First Bank, said a US India trade deal could lift India’s growth to around 8%. Sabnavis added that the GST reforms introduced on September 22, which established two slabs of 5% and 18% and reduced taxes on a wide range of household goods and durables, represented a strong tailwind.
Chief Economic Adviser V. Anantha Nageswaran said the government would continue to monitor global conditions but argued that India stood out as a relative oasis of stability and growth in an uncertain global environment. The statistics ministry, which is revising the GDP base year to 2022 23 from 2011 12, said quarterly estimates would be updated due to methodology changes, new data sources and revised benchmarks.
India is expected to become the world’s fourth largest economy by the end of 2025, according to the IMF’s April World Economic Outlook. India surpassed the United Kingdom to become the fifth largest economy a few years ago and is now on track to overtake Japan. The IMF noted that India has climbed from tenth to fourth place in just 11 years, driven by sustained growth and reforms under the NDA government.
Source: Economic Times