India’s economic growth likely accelerated to 7.3 percent in the July–September quarter of FY26, supported by a low base, stronger kharif activity, firmer rural demand and softer inflation, according to a Moneycontrol poll of 11 economists conducted last week. The projection is slightly above Reserve Bank of India’s (RBI) expected 7 percent growth for the July–September quarter.
On a full-year basis, economists expect GDP to grow 6.9 percent in FY26, with forecasts ranging between 6.3 percent and 7.3 percent, signalling that momentum may moderate in the second half of the fiscal year.
The median inflation projection for FY26 stands at 2.1 percent.
Growth supported by base effects, rural revival and festive demand
Economists highlighted that favourable statistical effects—especially the low 5.6 percent base in Q2FY25—combined with better monsoon outcomes, rural demand recovery, and pre-festive inventory build-up contributed to stronger Q2 growth.
DBS Bank’s senior economist Radhika Rao expects Q2 growth at 7.5 percent, citing “government spending, rural consumption, better real purchasing power due to weak inflation and frontloading of exports to have perked growth, while private sector investments and sector-specific drag (for instance IT) weighs.”
“Impact of the indirect tax cut will be more apparent in the third quarter as it took effect in late-2QFY,” said Rao, pointing to GST cuts which came into effect on September 22.
Barclays’ chief economist Aastha Gudwani echoed this sentiment, noting that “a combination of low base, above-normal monsoon and a pick-up in kharif sowing kept growth strong.”
“We are sceptical of demand momentum continuing at the same pace, and expect the consumption boost from GST rate cuts to fizzle out as we exit 2025,” she warned.
Inflation expected to remain soft, opening room for RBI easing
Soft inflation prints—October hitting a record low—have prompted most economists to revise CPI expectations downwards. The median CPI forecast from the poll is 2.1 percent.
Eighty percent of the economists expect the RBI to cut rates in the December policy, with most anticipating a 25-bps reduction to 5.25 percent. The median probability assigned to a December rate cut was 70 percent, compared with 20 percent for February and 15 percent for April.
ICRA chief economist Aditi Nayar expects CPI to remain subdued due to the GST rejig and a muted food-price build-up, supporting monetary easing.
Mixed domestic signals: rural strength, urban caution
IDFC First Bank’s chief economist Gaura Sengupta noted broad-based rural revival, including rising two-wheeler and tractor sales, lower NREGA demand and improving rural wages. However, she pointed to weak urban demand—highlighted by a drop in passenger vehicle sales—and slowing tax revenues which could restrain capex support.
CareEdge Ratings chief economist Rajani Sinha highlighted strong manufacturing and construction activity, supported by robust government capital expenditure and resilient exports during H1. She expects growth momentum to moderate in H2 as high US tariffs and fiscal consolidation weigh on performance.
Ind-Ra’s associate director Paras Jasrai flagged weakening nominal GDP growth which could complicate fiscal arithmetic despite strong real growth.
Looking ahead
Yuvika Oberoi from QuantEco expects Q3 growth to be supported by GST cuts and sustained capex from the government. However, Abhishek Upadhyay of ICICI Securities cautioned that the rebound in urban discretionary demand may not be durable, given rising household indebtedness, slow wage growth and weak savings.
A favourable outcome in India’s tariff negotiations with the US could lift export momentum and support FY26 growth closer to 7 percent, economists noted.
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