India’s growth likely slowed to 6.6 percent in the first quarter of FY26, down from 7.4 percent in the previous quarter, as manufacturing came under pressure from global uncertainties, according to a Moneycontrol poll of 15 economists.
“This slowdown can be largely attributed to weaker performance in mining, utilities, and manufacturing, as signalled by high-frequency indicators. Global trade policy uncertainties and persistent geopolitical tensions weigh on manufacturing, while an early onset of the monsoon has dampened mining activity,” said Rajani Sinha, chief economist, CareEdge Ratings.
Despite the drag from industry, economists pointed to resilience in public spending, services, and rural demand.
“We expect 1QFY26 (Apr–Jun25) GDP growth at 6.6 percent year-on-year, moderating from the quarter before. GVA growth is likely closer to 6.3 percent. Bulk of the support will show in the strong pick-up in government spending after election-related slowdown in the previous year, accompanied by steady service sector output, resilient rural demand in anticipation of a good monsoon, and better farm production,” said Radhika Rao, senior economist, DBS Bank.
The Centre spent Rs 2.75 lakh crore on capital expenditure in the quarter—25 percent of the full-year target—compared with just 16.3 percent in the same period last year. Services PMI data also showed the sector recording its highest activity in three quarters.
Full-year outlook and global risks
Forecasts in the poll ranged from 6.3 percent to 6.9 percent. For the full year, economists remained cautious, with the median at 6.3 percent. Dun & Bradstreet projected a slightly higher 6.5 percent growth. These estimates are broadly in line with global agencies and just below the RBI’s 6.5 percent projection.
“For FY26 as a whole, we project GDP growth at 6.4 percent, underpinned by recent interest rate cuts, strong agricultural output supporting rural consumption, benign inflation, and a favourable monsoon. This is based on the assumption that India will manage some kind of trade deal with the US, resulting in reduction of high tariff rates currently imposed,” said CareEdge’s Sinha.
Inflation outlook improves
On inflation, economists struck a more optimistic tone. Consumer prices are expected to rise just 3 percent this year, lower than both the 4 percent projected in May and the RBI’s 3.1 percent estimate.
Economists also flagged the pending GST cuts as an additional cushion. The Group of Ministers last week approved a two-rate structure that moves 90 percent of items in the 12 and 28 percent slabs into lower brackets. The GST Council is expected to take a final call on the proposal when it meets in New Delhi on September 2–3.
Two-thirds of the economists polled by Moneycontrol noted that the cuts could offset some of the impact of higher US tariffs.
“Lowering GST rates on essential goods and consumer durables would reduce prices, and stimulate consumption, which is critical when external demand is weakening. However, the relief (on GDP) would be limited, as GST cuts cannot fully compensate for export losses and may strain government revenues,” said Arun Singh, global chief economist, Dun & Bradstreet.
More easing ahead?
On monetary policy, economists expect one more cut by the end of FY26. The RBI has already reduced rates by 100 basis points this year, from 6.5 percent in January to 5.5 percent in July.
While the policy rate is currently pegged at 5.5 percent for end-2025, most economists expect it to ease further to 5.25 percent by March 2026.
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