RBI ups FY26 GDP growth forecast to 6.8% as demand, spending boost momentum

The Reserve Bank of India has upgraded its real GDP growth forecast for FY2026 to 6.8%, up from 6.5%, signalling renewed optimism in the economy’s underlying momentum.

The upward revision comes on the back of sustained consumer demand, rising public spending, and a strong pipeline of infrastructure investments. The RBI's policy statement also indicated confidence in managing inflation and external risks, bolstering its positive economic outlook.

Quarterly growth projections reflect a mixed trend: Q2FY26 is now expected to grow 7.0% (vs 6.7% earlier), while Q3 and Q4 were slightly trimmed to 6.4% and 6.2%, respectively. Q1FY27 was also lowered to 6.4% from 6.6%.

On inflation, the RBI noted outcomes have been softer than projected in August, suggesting price pressures may ease ahead. This adds to the central bank’s confidence in maintaining its current policy stance, especially as it held the repo rate steady in its latest decision.

Still, the RBI flagged tariff and trade policy uncertainties and persistent geopolitical tensions as downside risks that could weigh on demand and financial markets.

Investors responded positively. India’s benchmark 10-year bond yield dipped 2 basis points to 6.553% after the announcement, reflecting market confidence in the central bank’s economic assessment.

For businesses and consumers, the upgraded growth outlook suggests stronger job creation and income gains ahead, especially in sectors linked to consumption and infrastructure.