Is India’s GDP Set to Surge 7.4% in FY26 with RBI Rate Stability?
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Synopsis
India's economy is on the rise with a projected GDP growth of 7.4% for FY26, driven by key sectors like electricity and construction. Discover the implications of this growth and the RBI's anticipated rate decisions in a shifting economic landscape.
Key Takeaways
- Projected GDP Growth: 7.4% for FY26.
- Driving Sectors: Electricity, mining, and construction.
- RBI Rates: Expected pause in February 2026.
- Inflation Forecast: CPI to fall to 2% in FY26.
- Export Risks: Challenges anticipated unless a US trade deal is secured.
New Delhi, Dec 27 (NationPress) India’s real GDP growth is anticipated to reach 7.4 percent for FY26, an increase from 6.5 percent in FY25, as per a report noting seasonal improvements in the electricity, mining, and construction sectors.
The analysis by ICRA suggests that growth may decline to below 7 percent in the second half of FY26 from 8 percent in the first half, primarily due to an unfavorable base effect and a slowdown in exports.
Expectations indicate a pause in the February 2026 policy review by the RBI, with future decisions likely influenced by the upcoming FY27 Union Budget and changing inflation-growth dynamics.
Currently, economic activity appears robust in Q3 FY26, driven by a festive demand surge from GST rate cuts and seasonal boosts in certain sectors.
ICRA estimates that consumption of goods and services, along with manufacturing outputs, have benefited from GST reductions and festival-related demand in Q3. However, export challenges may escalate in H2 unless a trade deal with the US is finalized.
The firm predicts CPI inflation to drop to 2 percent in FY26 from 4.6 percent in FY25, while WPI is estimated to be at 0.4 percent.
In November 2025, CPI increased to 0.7 percent from 0.3 percent in October, attributed to a reduced deflation in food and beverages.
Looking ahead, mining, construction, and electricity demand are expected to see seasonal growth following disruptions caused by rainfall.
The report highlights that cement production is projected to increase by 6.5–7.5 percent in FY26, while steel demand may moderate to 7–8 percent after a strong performance in previous years. Electricity demand growth is forecasted to be subdued at 1.5–2 percent for FY26.
Nevertheless, external risks, such as delays in the US-India trade agreement and global policy shifts impacting service exports, have been flagged. Domestic challenges include lackluster export growth, monsoon variability, fiscal limitations, and inflationary pressure from commodity costs.
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Point of View
I believe that the projected GDP growth for India signifies resilience in the face of global challenges. The emphasis on key sectors and the RBI's strategic approach suggest a balanced outlook moving forward, pivotal for national progress.
NationPress
03/01/2026
Frequently Asked Questions
What is the projected GDP growth for India in FY26?
India's GDP is projected to grow by 7.4% in FY26, a notable increase from 6.5% in FY25.
Why is there a slowdown in GDP growth expected in the second half of FY26?
The slowdown is attributed to an unfavorable base effect and a moderation in exports.
What sectors are driving India's GDP growth?
Key sectors driving growth include electricity, mining, and construction.
Will the RBI change interest rates in February 2026?
The RBI is expected to pause any rate changes during the February 2026 policy review.
How does the forecast for CPI inflation look for FY26?
CPI inflation is anticipated to drop to 2% in FY26, down from 4.6% in FY25.
