India’s economy is expected to grow by 6.7% in the first quarter of FY26 (April–June 2025), according to a survey. The estimate matches closely with the Reserve Bank of India’s (RBI) forecast of 6.5% growth.
The growth is being driven by higher government spending, stronger rural demand, and a steady services sector. Economists expect growth to fall between 6.3% and 7%, compared to 6.5% in the same quarter last year. Official data will be released by the National Statistical Office on August 29.
Also See: SBI report: Private capex in FY26 projected at ₹6.6 lakh cr, below FY25, raising growth concerns
Key Growth Drivers
- Government investment: Capital expenditure rose 52% year-on-year, giving a strong push to growth.
- Sectors performing well: Services, agriculture, and construction showed improvement. Exports also rose 5.9%, helped by demand from the US.
- Positive signals: GST collections, steel output, and aviation cargo traffic increased.
Challenges Holding Back Growth
Despite positives, growth slowed from 7.4% in the March quarter due to weaker manufacturing and mining activity.
- Mining was hit by the early monsoon.
- Manufacturing was affected by global trade tensions and geopolitical issues.
- Power supply, coal production, cement, steel consumption, and port traffic also saw slower growth.
The Index of Industrial Production (IIP) grew only 2%, compared to 5.4% a year ago. Manufacturing growth slowed to 3.4% from 4.2%. Economists say unseasonal rains, weak private investments, and cautious businesses played a role in the slowdown.
Full-Year Growth Outlook
For the full FY26, India’s GDP is expected to grow around 6.3%, slightly below the RBI’s 6.5% forecast. Growth will likely be supported by:
- Interest rate cuts
- Good monsoon and strong farm output
- Stable inflation
- Recent GST rate rationalisation, which could add a small boost (0.2%) to GDP
Risks to Growth
- The US has imposed a 50% tariff on Indian goods, which could shave 0.2–0.3% off growth if it continues.
- Urban consumption is still weak because of slow income growth in formal jobs and limited IT sector hiring.
Read more: Gold Price Outlook Aug 22: Analysts see buy on dips above ₹99,000 with targets near ₹1,00,500
Global View
The World Bank expects India’s FY26 growth at 6.3%, while the IMF projects 6.4%, keeping India among the fastest-growing major economies. Economists say India’s strong domestic demand will protect it from global shocks.
Meanwhile, SBI estimates that India may have grown even faster, between 6.8% and 7% in Q1, which would be higher than the RBI’s forecast.
