India’s central bank, the Reserve Bank of India (RBI), has bumped up its forecast for the country’s GDP growth to 6.8 percent for 2025-26, up from the previous 6.5 percent estimate. RBI Governor Sanjay Malhotra shared this update on Wednesday, highlighting how key structural reforms—like simplifying the Goods and Services Tax (GST)—will help counter some global challenges and keep the economy on track.
Malhotra noted that India’s economy kicked off strong in the first quarter of 2025-26, with GDP expanding by a solid 7.8 percent. This surge came from robust private spending and steady investments in fixed assets. On the production side, gross value added (GVA) grew 7.6 percent, fueled by a comeback in manufacturing and consistent gains in the services sector. Recent data shows the economy staying tough amid pressures, with rural demand holding strong thanks to a solid monsoon and healthy agriculture output. Urban demand is picking up too, adding to the positive vibe.
“We’ve factored in all these trends, so real GDP growth for 2025-26 now stands at 6.8 percent,” Malhotra said. He broke it down by quarter: 7.0 percent for Q2, 6.4 percent for Q3, and 6.2 percent for Q4.
Globally, things look more stable than expected this year, with strong growth in the US and China propping up the world economy. But uncertainties linger, including policy shifts and inflation running hotter than targets in some advanced nations. This creates headaches for central banks balancing growth and price stability. Financial markets have seen ups and downs—the US dollar gained strength after better-than-expected US growth data, bond yields rose with shifting interest rate bets, and stock markets stayed upbeat in many developed and emerging economies.
At home, government spending by both central and state levels grew briskly from April to July. Investment signals remain healthy, with construction booming—think higher cement output and steel use in July and August—though capital goods production and imports dipped a bit. The manufacturing recovery keeps rolling, and services are maintaining their steady pace.
Looking forward, an above-average monsoon, solid progress in kharif crop planting, and full reservoirs point to brighter days for agriculture and rural spending. The services sector’s strength, combined with stable jobs, will support overall demand. Plus, tweaks to GST rates should give it an extra lift. With factories running closer to full capacity, easy access to finance, and rising domestic demand, fixed investments should keep flowing, Malhotra observed.
That said, risks are real. Trade tensions and tariff uncertainties could hit exports of goods and services. Ongoing geopolitical conflicts and jittery global markets—driven by investors pulling back—might drag on the growth outlook, the RBI chief warned.
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