FY26 GDP growth to surprise on the upside at about 7.4%, say analysts

The Indian economy is seen to grow at a faster-than-anticipated pace in the current fiscal, with tax cuts and lower repo rate boosting domestic consumption and helping tide over the external challenges including the 50% tariff imposed by the US on Indian exports.

Most analysts expect the economy to grow at over 7% and closer to 7.4% in the current fiscal, which is much higher than the initial estimate of 6.3% to 6.8% by the government during the Union Budget 2025-26 in February last year. While growth in the first half of the fiscal came in at 8%, they warn that the economy may slow down in the second half of the fiscal. Growth is also seen to soften in FY27 to about 7% if not lower.

The ministry of statistics and programme implementation will release the first advance estimates of GDP for FY 2025-26 on January 7.

Bank of America Global Research has upgraded India’s GDP growth outlook, driven by stronger-than-expected consumption momentum and continued policy support. In a new macro note on Friday, it estimated GDP growth in 2025-26 at 7.6% from its previous forecast of 7% and has revised the GDP growth estimate for FY27 to 6.8% from 6.5% earlier.

“Through 2025, despite rising external trade headwinds, India’s economic growth has continued to show improvement,” it said, noting that GDP growth was at a six-quarter high of 8.3% in the second quarter of the fiscal. “Since then, the incoming data on consumption, investment and public spending have all been relatively supportive, accelerating in both November and December to some of the strongest composite momentum we have seen in data since the beginning of 2025, and set up a strong end to 2025, posing upside risks to our existing macroeconomic scenario,” it further said.

ICRA has pegged GDP growth at about 7.4% this fiscal from 6.5% last fiscal. Aditi Nayar Chief Economist ICRA noted that growth outcomes have panned out better than expectations in 2025.  “This has benefitted from sizeable policy stimulus including income tax relief GST rate rationalisation 125 bps policy rate cuts and liquidity support. A sharp dip in inflation eased pressure on household budgets and an above normal monsoon boosted crop output,” she said.

The agency expects the GDP growth to accelerate to 7.4% in FY26 from 6.5% in FY25 albeit with a slower growth in H2 vis-à-vis H1. “Thereafter growth is expected to range between 6% and 7% in FY27 with the upper end of the range likely to materialise if the trade deal is struck before the next fiscal begins and new constraints are not imposed on the services trade front,” Nayar said. 

Crisil expects India’s gross domestic product to grow 7% this full fiscal, compared with 6.5% last fiscal and then moderate to 6.7% next fiscal. The Reserve Bank of India has also upgraded India’s GDP growth forecast to 7.3% this fiscal from 6.8% this fiscal. Post the second quarter GDP estimates, Chief Economic Advisor V Anantha Nageswaran had also expressed confidence that the economy would grow at 7% or more this fiscal.