India’s economy is projected to grow between 6.8 and 7 per cent in the first quarter of the current fiscal year (Q1 FY26), driven by higher discretionary spending and demand-led growth, according to a report by SBI Research released on Thursday.
The report estimated gross value added (GVA) growth at 6.5 per cent for the quarter, noting that the gap between real and nominal growth is likely to narrow significantly. It highlighted that the peak elasticity of government capital expenditure to GDP has reached 1.17, underscoring the need for private investment to complement public spending for sustainable growth.
“A major concern for long-term growth is muted private capital expenditure. Numbers may further decline as US tariffs could impact investment. Private investment must support public investment to take the economy onto a higher sustainable growth path,” the report noted.
SBI Research also observed that while the global economy remains stable, distortions arising from tariffs, rather than underlying strength, are shaping the activity. The International Monetary Fund (IMF) has revised global growth projections to 3 per cent for 2025 and 3.1 per cent for 2026, primarily reflecting front-loading ahead of tariff implementation. India’s growth forecast has been revised upwards by 20 basis points to 6.4 per cent, and China’s by 80 basis points to 4.8 per cent.
During Q1 FY26, Indian companies with approximately 4,300 listed entities reported 4.7 per cent growth and 6.7 per cent EBITDA growth, compared to 11 per cent EBITDA growth in the previous quarter. However, SBI Research cautioned that the resumption of tariffs on Indian exports may negatively affect earnings over the next two quarters.