The Reserve Bank of India (RBI) announced on Wednesday that it has revised its GDP growth projection for the fiscal year 2025-26 to 6.8% and lowered the inflation forecast to 2.6%. The adjustments stem from an above-normal monsoon and a rationalisation of Goods and Services Tax (GST) rates.
Previously, in August, the RBI anticipated a 6.5% growth rate for this period, alongside an inflation forecast of 3.1%. The revisions reflect significant domestic economic developments amid a shifting global landscape, according to Governor Sanjay Malhotra.
Governor Malhotra expressed optimism, stating, “Buoyed by good monsoon, the Indian economy continues to exhibit strength by registering a higher growth in Q1 2025-26. At the same time, there has been a considerable moderation in headline inflation.”
The RBI’s decision to adjust the GDP growth and inflation forecasts indicates a positive economic outlook. The robust monsoon has contributed significantly to the agricultural sector, which aids overall economic growth. Malhotra emphasized that the rationalisation of GST is expected to stimulate consumption and alleviate inflationary pressures.
“The rationalisation of GST rates is likely to have a sobering impact on inflation while stimulating consumption and growth,” he added. Despite these positive signals, Malhotra cautioned that US tariffs could adversely affect Indian exports, further complicating the economic situation.
With the new figures, the RBI projects the GDP growth for FY26 to occur at various rates: 7.0% in Q2, 6.4% in Q3, and 6.2% in Q4. For the first quarter of 2026-27, they estimate a growth of 6.4%.
Inflation has remained low throughout FY26, with actual figures falling below prior projections. Malhotra attributed this economic stability mainly to the sharp decline in food inflation, aided by improved supply chains and proactive government policies.
“Core inflation has also remained largely contained, with the August reading at 4.2%, despite sustained price pressures on precious metals,” he noted. This decline in inflation should foster a stable economic environment conducive to growth.
The CPI inflation forecast for FY26 is set at 2.6%, with predictions of 1.8% for both Q2 and Q3, and 4.0% for Q4. The CPI-based inflation for the first quarter of 2026-27 is projected at 4.5%.
The RBI’s proactive measures and optimistic outlook reflect a broader trend towards economic resilience, suggesting that India is on a path towards sustainable growth. Stakeholders are keenly monitoring how these revisions might influence market dynamics and consumer behavior in the coming quarters.