The Reserve Bank of India on February 7 said it expects the country's economy to grow at 6.7 percent for the financial year 2025-26.
Governor Sanjay Malhotra said the central bank projects a real GDP growth of 6.7 percent for FY26, Q1 revised down at 6.7 percent from 6.9 percent, Q2 down at 7 percent from 7.3 percent and Q3 and Q4 at 6.5 percent each.
Healthy Rabi prospects and an expected recovery in industrial activity should support economic growth in 2025-26, Malhotra said while announcing his first bi-monthly monetary policy for the current fiscal.
Among the key drivers on the demand side, household consumption is expected to remain robust aided by the tax relief in the Union Budget 2025-26, he said.
Finance Minister Nirmala Sitharaman in Budget 2025-26 provided the biggest-ever tax break to the middle class to boost consumption after the economy slowed to its lowest pace since the pandemic.
Malhotra also pointed out that the global economic situation remains challenging. "The global economic backdrop remains challenging. The global economy is growing below the historical average, even though high frequency indicators suggest resilience," he said.
The monetary policy committee also unanimously decided to reduce the policy rate by 25 bps to 6.25 percent from 6.5 percent and maintain its neutral stance. The central bank also pegged the inflation unchanged at 4.8 percent for the current year and at 4.2 percent for the next financial year.
The GDP growth projection is being keenly watched after the slowdown in the economy led to a sluggish second quarter of the current financial year and a lower first advanced estimates.
The country's GDP growth declined to a 7-quarter low of 5.4 percent in July-September period of current financial year 2024-25, as against RBI's own projection of 7 percent.
The Economic Survey 2025 estimated a real GDP growth of 6.4 percent in FY25, 20 bps lower than the projection by the RBI in its December monetary policy.
The Survey also highlighted that the country's real GDP growth is expected to grow at 6.3-6.8 percent in FY26, signaling "moderate prospects buffeted by multiple headwinds, including a looming global trade war and artificial intelligence (AI)-induced disruptions".
In the previous monetary policy meeting held in December, the central bank had reduced the growth forecast to 6.6 percent for FY25 from 7.2 percent earlier.
RBI had revised its estimate for the December quarter to 6.8 percent from 7.4 percent earlier and Q4FY25 to 7.2 percent from 7.4 percent.
According to the National Statistics Office (NSO) data, the country's real and nominal GDP are likely to grow at 6.4 percent and 9.7 percent respectively in FY25 as per the first advanced estimates, while the nominal GDP is projected to grow by 10.1 percent in FY26.
The central bank has projected an inflation of 4.6 percent in the first quarter of FY26 and 4 percent in the subsequent quarter (Q2FY26).
The government is targeting fiscal deficit at 4.8 percent of GDP for FY25 (RE 2024-25), on track to attain below 4.5 percent in FY26.
With agency inputs
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