FY26 GDP growth to surprise on the upside at about 7.4%, say analysts

The Indian economy is expected to grow faster than expected in the current fiscal year, as tax cuts and lower repo rate boost domestic consumption and help overcome external challenges including the 50% tariff imposed by the US on Indian exports.

Most analysts expect the economy to grow at more than 7% and closer to 7.4% in the current fiscal year, much higher than the initial estimate of 6.3% to 6.8% by the government during the 2025-26 Union Budget in February last year. While growth in the first half of the fiscal year was 8%, they warn that the economy may slow down in the second half of the fiscal year. Growth in FY27 is also expected to decline to around 7% if not less.

The Ministry of Statistics and Program Implementation will release the first advance estimates of GDP for the fiscal year 2025-2026 on January 7.

Bank of America Global Research has updated its GDP growth forecast for India, driven by stronger-than-expected consumption momentum and continued policy support. In a new macro note released on Friday, it estimated GDP growth in 2025-26 at 7.6% from its previous forecast of 7% and revised its FY27 GDP growth estimate to 6.8% from 6.5% previously.

“Until 2025, despite increasing foreign trade headwinds, India’s economic growth continues to show improvement,” she said, noting that GDP growth reached a six-quarter high of 8.3% in the second quarter of the fiscal year. “Since then, incoming data on consumption, investment and public spending have all been relatively supportive, accelerating in both November and December to some of the strongest compounding momentum seen in data since the start of 2025, setting up a strong end to 2025, posing upside risks to our current macroeconomic scenario,” he added.

ICRA has pegged GDP growth at around 7.4% this fiscal from 6.5% in the last fiscal. Aditi Nayar, Chief Economist at ICRA, noted that growth outcomes have delivered better than expectations in 2025. “This has benefited from significant policy stimulus including income tax relief, rationalization of the GST rate by 125 basis points, interest rate cuts and liquidity support. The sharp decline in inflation has eased pressure on household budgets and an above-normal monsoon has boosted crop production,” she said.

The agency expects GDP growth to accelerate to 7.4% in FY26 from 6.5% in FY25, albeit with slower growth in the second half compared to the first half. “Growth is then expected to be between 6% and 7% in FY2027, and the upper end of the range is likely to be achieved if the trade agreement is concluded before the start of the next fiscal year and no new restrictions are imposed on the services trade front,” Nayar said.

Crisil expects India’s GDP to grow by 7% this full fiscal year, compared to 6.5% in the last fiscal year and then moderating to 6.7% in the next fiscal year. The Reserve Bank of India also raised India’s GDP growth forecast to 7.3% this fiscal year from 6.8% this fiscal year. Following the Q2 GDP estimates, Chief Economic Advisor Anantha Nageswaran also expressed confidence that the economy will grow by 7% or more this fiscal year.