India's FY26 GDP growth forecast revised upward to 7%
What's the story
India Ratings and Research (Ind-Ra) has upgraded its Gross Domestic Product (GDP) growth forecast for the current fiscal year to 7%. This is a major revision from its earlier estimate of 6.3%, made in July 2025. The agency attributed this upward revision to robust growth in the June quarter and a lesser-than-expected impact of US tariff hikes on global trade and economy.
Economic performance
GDP growth outpaces RBI's projection
The Reserve Bank of India (RBI) had projected a 6.8% GDP growth for the current fiscal year, slightly above last year's expansion of 6.5%. Notably, India's real GDP grew at its fastest pace in five quarters at 7.8% during the April-June period of FY24. The official data for Q2 (July-September) is expected to be released on November 28.
Economic factors
Major headwinds and tailwinds
Ind-Ra's Chief Economist and Head of Public Finance, Devendra Kumar Pant, noted that the global landscape has changed significantly since its last forecast in July 2025. The agency identified US unilateral tariff hikes as a major headwind for all countries, including India. However, it also highlighted faster-than-expected inflation decline and GST rationalization as key tailwinds boosting the economy.
Risk assessment
Balanced view on FY26 growth risks
Ind-Ra maintains a balanced view on the risks to FY26 growth. The agency said, "A faster Indo-US trade deal and favorable weather conditions during winter months have the potential to push GDP growth higher than 7%." However, it also warned that if demand revival (consumption and investment) is weaker than expected, it could pull down GDP growth.
Consumption forecast
Growth in private final consumption expenditure
Ind-Ra expects Private Final Consumption Expenditure (PFCE) to grow by 7.4% year-on-year in FY26, up from 7.2% in FY25. This growth is expected to be driven by GST rationalization and lower inflation rates. The agency also noted a decline in Indian exports to the US over September and October 2025, highlighting the need for a bilateral trade deal with the US and alternative markets for Indian exports.