The Reserve Bank of India (RBI) raised its GDP growth forecast for the fiscal year 2025-26 to 6.8% while reducing the inflation estimate to 2.6%. The adjustments stem from favorable monsoon conditions and changes in Goods and Services Tax (GST) rates.
In August, the RBI pegged the GDP growth rate at 6.5% for FY26. Alongside this, it had estimated inflation at 3.1%. The latest announcement marks a significant revision in economic outlook.
RBI Governor Sanjay Malhotra highlighted that these changes follow important domestic developments amid a fluctuating global economic environment. He stated, “The Indian economy shows resilience, with robust growth recorded in the first quarter of 2025-26. There has also been a marked decline in headline inflation.”
Malhotra pointed out that the rationalization of GST rates is likely to moderate inflation further, while also boosting consumption. However, he noted that US tariffs might affect export growth.
“Taking all these factors into account, real GDP growth for 2025-26 is projected at 6.8%,” he said. He further detailed the expected quarterly growth: 7.0% for Q2, 6.4% for Q3, and 6.2% for Q4. For the first quarter of 2026-27, the estimated GDP growth is 6.4%.
Malhotra confirmed that inflation rates during the current fiscal year have remained benign. Actual inflation levels have significantly decreased from previous projections, primarily due to a decline in food prices.
The sharp decrease in food inflation arises from improved supply chains and effective government interventions. Core inflation, despite some ongoing price pressures in sectors like precious metals, has stabilized, with the latest reading at 4.2%.
“For 2025-26, CPI inflation is projected at 2.6%, with Q2 and Q3 both expected at 1.8%, and Q4 at 4.0%,” the Governor elaborated. The CPI inflation for the first quarter of 2026-27 is anticipated to be 4.5%.
These projections from the RBI reflect the bank’s assessment of the changing economic conditions and the factors influencing consumer prices and growth. The impact of monsoon performance and fiscal policies continue to play a crucial role in shaping India’s economic trajectory.
