Business

RBI Raises India’s GDP Growth Forecast To 6.8% For 2025-26

The Reserve Bank of India (RBI) raised India’s GDP growth projection for 2025-26 to 6.8 per cent, up from its earlier forecast of 6.5 per cent, citing strong domestic demand and structural reforms, RBI Governor Sanjay Malhotra said on Wednesday.

Q1 Growth Robust at 7.8%

Governor Malhotra highlighted that India’s GDP grew 7.8 per cent in Q1 of 2025-26, driven by robust private consumption and fixed investment. On the supply side, gross value added (GVA) rose 7.6 per cent, supported by a revival in manufacturing and steady expansion in services.

He noted that high-frequency indicators suggest sustained economic resilience, with rural demand buoyed by a good monsoon and strong agricultural activity, while urban demand shows a gradual recovery.

Taking these factors into account, the RBI projected GDP growth for the year as follows:

  • Q2: 7.0 per cent
  • Q3: 6.4 per cent
  • Q4: 6.2 per cent

Global Economic Context

The RBI Governor said the global economy has been more resilient than expected in 2025, with strong growth in the US and China. However, elevated policy uncertainty, inflation above targets in advanced economies, and financial market volatility remain challenges for global central banks.

Malhotra added that the US dollar strengthened following upward revisions to US growth numbers, and treasury yields hardened, reflecting changing policy rate expectations. Equities, however, remained buoyant across several advanced and emerging economies.

The RBI Governor reported that Union and state government revenue expenditure registered robust growth between April and July. Investment activity, reflected in healthy construction indicators like cement production and steel consumption in July-August, remained strong despite a moderation in capital goods production and imports.

He noted that the manufacturing sector continues to recover while services activity maintains momentum.

Agriculture, Rural Demand, and GST Reforms

Looking ahead, an above-normal monsoon, good progress in kharif sowing, and adequate reservoir levels support agriculture and rural demand. Buoyant services activity and steady employment conditions are expected to further strengthen domestic demand.

The RBI highlighted that rationalisation of GST rates should provide an additional boost to consumption and fixed investment. Rising capacity utilisation and supportive financial conditions are also expected to facilitate growth.

Governor Malhotra cautioned that ongoing tariff and trade policy uncertainties could affect external demand for goods and services. Prolonged geopolitical tensions and volatility in international financial markets due to risk-off investor sentiment pose additional downside risks to India’s growth outlook.

Also Read: CM Rekha Gupta Performs Kanya Pujan On Maha Navami; Unveils Plan For New School In Haiderpur

Purnima Mishra

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