RBI GDP Growth 2026: Central bank nudges forecast higher, upgrades early FY27 outlook

India’s central bank on Friday raised its real GDP growth projection for 2025-26 to 7.4%, signalling confidence in the durability of domestic demand even as global trade uncertainties and financial market volatility cloud the external outlook, as it held interest rates steady.

The revised forecast marks a modest upgrade from the 7.3% growth estimate announced in December, reinforcing the Reserve Bank of India’s view that Asia’s third-largest economy remains relatively insulated from global headwinds.

The RBI also revised upward its early outlook for 2026-27, projecting real GDP growth of 6.9% in the first quarter and 7.0% in the second, compared with its earlier estimates of 6.7% and 6.8%, respectively. The central bank said economic activity is expected to hold up well into the next financial year, supported by sustained momentum in consumption and investment.


The Monetary Policy Committee said future decisions would continue to be guided by evolving macroeconomic conditions, even as the growth outlook remains constructive. The central bank also flagged that a new series for GDP and inflation will be released in the coming days, a shift that could recalibrate headline macroeconomic indicators going forward.

The RBI reiterated that domestic drivers of growth remain intact, with private consumption expected to sustain its momentum into next year. Urban demand, improving labour market conditions and easing inflationary pressures are likely to support household spending, it said.

Investment activity is also expected to remain steady, led by public capital expenditure and supported by healthier corporate and bank balance sheets. The central bank said the construction sector is likely to remain firm, reflecting continued infrastructure spending and housing demand.

In addition, the RBI said services exports are expected to remain resilient, providing a key buffer against global trade slowdown. Strong demand for IT services, business services and travel-related exports has helped offset weakness in merchandise exports, a trend the central bank expects to persist.

The RBI governor also pointed to a modest upside to growth expectations, estimating that India’s GDP outlook has improved by around 20 basis points. Officials attributed the incremental boost to a combination of factors, including easing external uncertainties and progress on key trade engagements such as the deal with the United States, which is expected to support exports, investment sentiment and overall economic momentum.

The growth outlook also draws support from measures announced in the Union Budget, which the RBI said should be conducive to sustaining economic momentum. Higher public spending on infrastructure, manufacturing incentives and efforts to crowd in private investment are expected to underpin medium-term growth prospects.

The MPC has consistently highlighted India’s relative insulation from external shocks, pointing to strong domestic demand, a healthier banking system and sustained government capital expenditure. Growth estimates were often retained or trimmed marginally, even as global growth forecasts were being slashed, reinforcing the RBI’s argument that India was better placed than many peers to weather tightening financial conditions.

A key feature of the MPC’s growth outlook in recent years has been its reliance on public investment as an anchor. Across multiple policy statements, the RBI flagged the crowding-in effects of government capex, improvements in logistics and infrastructure, and stronger balance sheets of banks and corporates. This structural optimism often tempered concerns arising from weak global trade, slowing exports or geopolitical risks.

The RBI’s relatively upbeat assessment stands in contrast to a still-uncertain global backdrop marked by slowing growth in major economies, geopolitical tensions and volatile financial conditions. Even so, the central bank has consistently argued that India’s growth drivers are increasingly domestically anchored, reducing vulnerability to external shocks.

Government estimates broadly align with the RBI’s view. The government’s chief economic adviser has forecast growth of 6.8% to 7.2% for the next financial year, citing resilient demand and continued investment activity.