RBI retains India’s GDP growth forecast at 6.5 pc for FY 2025-26

Mumbai, Aug 6 (IANS) The RBI on Wednesday retained its forecast for India’s GDP growth at 6.5 per cent for FY 2025-26, despite global uncertainties, as it expects strong rural demand on the back of a good monsoon and robust government expenditure on big ticket infrastructure projects to propel growth. 

RBI Governor Sanjay Malhotra said, “The above normal southwest monsoon, lower inflation, rising capacity utilization and congenial financial conditions continue to support domestic economic activity. The supportive monetary, regulatory and fiscal policies including robust government capital expenditure should also 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, projection for real GDP growth for 2025-26 has been retained at 6.5 per cent, with Q1 at 6.5 per cent, Q2 at 6.7 per cent, Q3 at 6.6 per cent, and Q4 at 6.3 per cent. Real GDP growth for Q1 2026-27 is projected at 6.6 per cent,” the RBI Governor said after the MPC meeting..

However, he pointed out that the prospects of external demand remain uncertain amidst ongoing tariff announcements and trade negotiations. The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook, he added.

Malhotra said that domestic growth remains resilient and is broadly evolving along the lines of the RBI’s assessment. Private consumption, aided by rural demand, and fixed investment, supported by buoyant government capex, continue to boost economic activity.

On the supply side, a steady south-west monsoon is supporting kharif sowing, replenishing reservoir levels and boosting agriculture activity. Moreover, services sector and construction activity remain robust. However, growth in industrial sector remained subdued and uneven across segments, pulled down by electricity and mining, he explained.

The global environment continues to be challenging. Although financial market volatility and geopolitical uncertainties have abated somewhat from their peaks in recent months, trade negotiation challenges continue to linger. Global growth, though revised upwards by the IMF, remains muted. The pace of disinflation is slowing down, with some advanced economies even witnessing an uptick in inflation, he added.

--IANS

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