The Reserve Bank of India (RBI) on Wednesday retained its GDP growth forecast for India at 6.5% for the financial year 2025-26, citing robust rural demand supported by a favourable monsoon and continued government expenditure on large-scale infrastructure projects.
RBI Governor Sanjay Malhotra said, “The above-normal southwest monsoon, lower inflation, rising capacity utilisation, and favourable financial conditions continue to support domestic economic activity. Supportive monetary, regulatory, and fiscal policies, including strong government capital expenditure, should further boost demand. The services sector is expected to remain buoyant, with sustained growth in construction and trade in the coming months.”
“Taking all these factors into account, the projection for real GDP growth for 2025-26 has been retained at 6.5%, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%. Real GDP growth for Q1 of 2026-27 is projected at 6.6%,” he added, following the Monetary Policy Committee (MPC) meeting.
However, Malhotra flagged global uncertainties as a concern, noting that external demand prospects remain uncertain amid ongoing tariff announcements and trade negotiations. Prolonged geopolitical tensions, persisting global uncertainties, and financial market volatility also pose risks to the growth outlook.
He stated that domestic growth remains resilient and is broadly progressing in line with the RBI’s assessment. Private consumption, aided by strong rural demand, and fixed investment, supported by buoyant government capital expenditure, continue to drive economic activity.
On the supply side, a steady southwest monsoon is supporting kharif sowing, replenishing reservoir levels, and boosting agricultural output. The services and construction sectors also remain robust. However, industrial sector growth continues to be subdued and uneven, dragged down by slower performance in electricity and mining segments, he noted.
Malhotra further highlighted that the global environment remains challenging. While financial market volatility and geopolitical tensions have moderated somewhat in recent months, trade negotiation hurdles persist. Despite the International Monetary Fund (IMF) revising global growth forecasts upwards, the overall outlook remains muted. The pace of disinflation is also slowing, with some advanced economies even witnessing a renewed rise in inflation.
–IANS