The Reserve Bank of India (RBI) announced on Wednesday its revised projections for India’s economic indicators, raising the growth estimate for the fiscal year 2025-26 to 6.8 percent while reducing its inflation forecast to 2.6 percent. This adjustment reflects the positive impact of an above-normal monsoon and recent Goods and Services Tax (GST) rate changes.
Previously, in August, the RBI had estimated GDP growth at 6.5 percent for the same period, with an inflation forecast of 3.1 percent. The update comes as part of the RBI’s bi-monthly monetary policy review, underscoring the dynamic nature of both domestic and global economic landscapes.
Reserve Bank Governor Sanjay Malhotra emphasized that significant developments have shifted perceptions regarding growth and inflation dynamics in India. “Buoyed by good monsoon, the Indian economy continues to exhibit strength by registering a higher growth in Q1 2025-26,” he stated. The Governor highlighted a notable drop in headline inflation, contributing to this optimistic outlook.
Malhotra elaborated on the influence of GST rationalization, clarifying that it will likely curb inflationary pressures while concurrently fostering consumption and growth. He noted, however, that increasing US tariffs might dampen export performance, presenting a challenge ahead.
The RBI’s updated forecast indicates that real GDP growth for 2025-26 is now projected at 6.8 percent, with anticipated quarterly growth rates of 7.0 percent in Q2, 6.4 percent in Q3, and 6.2 percent in Q4. Furthermore, the RBI estimates a 6.4 percent growth rate for the first quarter of 2026-27.
On the inflation front, the Governor stated that current conditions remain favourable, with actual inflation levels significantly lower than initial projections. The sharp decline in food inflation particularly bolstered this trend, alongside government initiatives aimed at enhancing supply chain management.
Despite facing some price pressures on precious metals, core inflation has largely been contained, with the August reading standing at 4.2 percent. Malhotra conveyed, “CPI inflation for 2025-26 is now projected at 2.6 percent, with expectations of 1.8 percent for both Q2 and Q3, and 4.0 percent for Q4.” Additionally, the inflation for the first quarter of 2026-27 is anticipated to reach 4.5 percent.
As India navigates these economic forecasts, the RBI’s proactive stance signals a strategic approach to stabilizing both growth and inflation in a constantly evolving economic environment. Stakeholders across sectors will keenly observe these trends as businesses and consumers adapt to the new fiscal landscape.
