The Reserve Bank of India (RBI) on Friday revised its real GDP growth projection for the current financial year to 7.3 per cent, marking an upward revision of 0.5 percentage points from its earlier forecast of 6.8 per cent set out in its October meeting.
Governor Sanjay Malhotra said the upgrade reflects stronger-than-expected domestic demand conditions, supported by benign inflation, resilient consumption and healthy investment momentum.
Malhotra highlighted that the economy posted a six-quarter high real GDP growth of 8.2 per cent in Q2, underpinned by robust domestic demand despite global trade and policy uncertainties. Real GVA also expanded by 8.1 per cent in the quarter, driven by buoyant industrial and services activity.
He noted that economic activity in the first half of the year benefited from income-tax and GST rationalisation, softer crude oil prices, front-loading of government capital expenditure and facilitative monetary and financial conditions. High-frequency indicators, he said, point to domestic economic activity “holding up” in Q3, though with “some signs of weakness” in a few leading indicators.
Rural demand “continues to be robust”, while urban demand is recovering steadily. Investment activity “remains healthy”, with private investment gaining steam, aided by growth in non-food bank credit and capacity utilisation at around 75 per cent.
Agricultural prospects have improved on the back of a healthy kharif crop, higher reservoir levels and better rabi sowing conditions. Manufacturing activity continues to improve, and services maintain a steady pace of expansion.
Based on these dynamics, the RBI now projects GDP growth of 7 per cent in Q3 FY26 and 6.5 per cent in Q4FY26. For the next financial year, the central bank projects 6.7 per cent growth in Q1 and 6.8 per cent in Q2, with overall risks “evenly balanced”.
On the external front, Malhotra said services exports are likely to remain strong, even as merchandise exports face headwinds from weak global demand. He added that the speedy conclusion of ongoing trade and investment negotiations presents upside potential for growth, while external uncertainties continue to pose downside risks.
He reiterated that healthy corporate and financial-sector balance sheets, benign inflation, improved agricultural conditions and continuing reform momentum should support economic activity going forward.
