Q2 GDP surprise lifts FY26 growth view, but December rate cut bets cool

GDP beats expectations, but dims hopes of a December rate cut

India’s stronger-than-expected Q2 GDP print has pushed most brokerages to revise their full-year FY26 growth expectations higher, with consensus now gravitating toward the 7–7.5 percent range. But even as real activity looks robust, the latest numbers have also tempered hopes of an imminent policy pivot. A clutch of economists now see the probability of a December RBI rate cut slipping to about 60 percent, down from 70–80 percent earlier.

What are brokerages saying on stellar Q2 GDP print

CLSA said the sharp 8 percent growth seen in the first half of FY26 is unlikely to continue, expecting the second half to slow to around 6 percent. Softer inflation could lift real GDP in Q3, but they still see momentum cooling. HSBC called the Q2 figure a “whopping” beat driven by GST cuts, a low base and deflator effects. It highlighted strong consumption but weak net exports, and expects growth to ease by March 2026 as fiscal support gradually fades.

JPMorgan described the print as the result of a “perfect storm” of cyclical and statistical boosts, but pointed to the steep fall in the GDP deflator, with nominal growth at just 8.7 percent — a sign that the gap between real and nominal activity is narrowing.

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Nomura took a more optimistic view, calling the outcome “staggering” and lifting its FY26 forecast to 7.5 percent from 7 percent. Macquarie noted that GDP is now at a six-quarter high, and said consumption may strengthen further in Q3 as the impact of GST cuts flows through.

Brokerages on RBI's rate cut path

While most brokerages still see room for policy easing, the blockbuster GDP print has reduced the conviction around a December rate cut. Several economists now peg the probability of a cut at around 60 percent, down from 70–80 percent earlier.

CLSA lowered its probability for a December move to 60 percent from 80 percent, though it still expects a small 25 bps cut. Nomura also stuck to its 25 bps call but trims the probability to 60 percent from 65 percent, warning the MPC may lean towards another “dovish hold.”

HSBC remained confident of a December cut, arguing that slower growth ahead and weak exports justify early easing. Macquarie is less convinced, saying the chances of a December cut “may be low” given strong GDP momentum.

Overall, the policy debate has shifted from when to cut to whether the RBI might delay the pivot, as strong real GDP and a soft deflator complicate the central bank’s immediate reaction.

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