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RBI raises FY26 GDP growth projection to 7.3%

Posted By: Tarun Kumar Posted On: Dec 05, 2025Share Article
RBI raises FY26 GDP growth projection to 7
Image used for illustration purpose only | Photo Credit: Getty Images/iStockphoto

RBI raises FY26 GDP growth projection to 7.3%

Reserve Bank on Friday (December 5, 2025) raised the GDP growth projection to 7.3% for the current fiscal from its earlier estimate of 6.8% following robust economic performance in the July-September quarter.

The Gross Domestic Product (GDP) registered a six-quarter high growth of 8.2% in Q2 of 2025-26, underpinned by resilient domestic demand amidst global trade and policy uncertainties.

On the supply side, real Gross Value Added (GVA) expanded by 8.1%, aided by buoyant industrial and services sectors.

Unveiling the December monetary policy, Reserve Bank Governor Sanjay Malhotra said economic activity during the first half of 2025-26 benefited from income tax and Goods and Services Tax (GST) rationalisation, softer crude oil prices, front-loading of government capital expenditure, and facilitative monetary and financial conditions supported by benign inflation.

High-frequency indicators suggest that domestic economic activity is holding up in the October-December quarter, although there are some emerging signs of weakness in few leading indicators, he said.

"GST rationalisation and festival-related spending supported domestic demand during October-November," he said and added rural demand continues to be robust while urban demand is recovering steadily.

Also, investment activity remains healthy with private investment gaining steam on the back of expansion in non-food bank credit, and high capacity utilisation.

The governor also noted that merchandise exports declined sharply in October amid subdued external demand, accompanied by softer services exports.

On the supply side, agricultural growth is supported by healthy kharif crop production, higher reservoir levels and better rabi crop sowing.

Manufacturing activity continues to improve, while the services sector is maintaining a steady pace, Malhotra said.

"Taking all these factors into consideration, real GDP growth for 2025-26 is projected at 7.3%, with Q3 at 7%; and Q4 at 6.5%. Real GDP growth for Q1 of 2026-27 is projected at 6.7% and Q2 at 6.8%. The risks are evenly balanced," he said.

On the external front, the governor said Foreign Direct Investment (FDI) to India increased at a robust pace during the first half of the year.

Net FDI also increased significantly due to a decline in repatriation despite a rise in outward FDI.

However, Foreign Portfolio Investment (FPI) to India recorded net outflows of $0.7 billion in 2025-26 so far (April-December 3), due to outflows in the equity segment.

Flows under external commercial borrowings and non-resident deposit accounts moderated as compared to last year.

As on November 28, 2025, India's foreign exchange reserves stood at USD 686.2 billion, providing a robust import cover of more than 11 months, Malhotra said.

"Overall, India's external sector remains resilient. We are confident of meeting our external financing requirements comfortably," he said.

India's current account deficit moderated from 2.2% of GDP in Q2 of 2024-25 to 1.3% in Q2 of 2025-26 on account of robust services exports and strong remittances.

The governor also said that contrary to earlier expectations, global growth has been relatively strong.

Evolving geopolitical and trade environments, however, continue to weigh on the outlook, he added.

Published - December 05, 2025 12:32 pm IST

economy, business and finance / economy (general) / money and monetary policy / Reserve Bank of India

Source: TheHindu
Related Posts: Reserve Bank of India,RBI monetary policy,RBI raises GDP growth forecast to 7.3%,strong domestic demand,resilient industrial and services sectors

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