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India's GDP to Hit 7.4% in FY26, RBI Likely on Hold Amid Inflation Plunge

India's real GDP growth is projected to accelerate to 7.4% in FY26, up from 6.5% the previous year, driven by a seasonal recovery in sectors like electricity, mining, and construction. The Reserve Bank of India is expected to keep interest rates unchanged in its February 2026 policy review, with future decisions hinging on the upcoming Union Budget and inflation trends. Consumer price inflation is forecast to plummet to 2% in FY26, a sharp drop from 4.6% in FY25, though domestic and external risks persist. These risks include subdued export growth, monsoon variability, fiscal constraints, and potential delays in a US-India trade deal.

Key Points: India FY26 GDP Growth 7.4%, RBI Pause Expected

  • GDP growth projected at 7.4% for FY26
  • CPI inflation forecast to plunge to 2%
  • RBI expected to pause rates in Feb 2026
  • Seasonal pick-up in electricity, mining & construction
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India's GDP projected to grow 7.4 pc in FY26, RBI to keep rates unchanged in Feb

ICRA projects India's GDP growth at 7.4% for FY26, with CPI inflation plunging to 2%. The RBI is expected to hold rates in February 2026.

"Cement production is expected to grow 6.5-7.5 per cent in FY26. - ICRA Report"

New Delhi, Dec 27

India's real GDP growth is projected at 7.4 per cent for FY26, up from 6.5 per cent in FY25, a report has said, highlighting seasonal pick up in electricity, mining and construction sectors.

The report from ICRA said that growth is expected to ease below 7 per cent in H2 FY26 from 8 per cent in H1 because of an unfavourable base effect and moderation in exports.

The report expects a pause in the February 2026 policy review by the RBI, with future decisions to be guided by the FY27 Union Budget and evolving inflation-growth dynamics.

Meanwhile, economic activity remained healthy in Q3 FY26, aided by GST rate‑cut led festive demand and seasonal upticks in some sectors.

ICRA expects consumption volumes of goods and services as well as manufacturing volumes to have benefited from GST cuts and festival demand in Q3, though the export drag may intensify in H2 unless a US trade deal materialises.

The firm forecasts CPI inflation to plunge to 2 per cent in FY26 from 4.6 per cent in FY25, with WPI at 0.4 per cent.

CPI rose to 0.7 per cent in November 2025 from 0.3 per cent in October, due to a narrower deflation in food and beverages.

Additionally, mining and construction activity as well as electricity demand are set to witness a seasonal pick up in the coming months, after the easing owing to rainfall-related disruptions, it said.

"Cement production is expected to grow 6.5-7.5 per cent in FY26. Steel demand growth may moderate to 7-8 per cent after strong previous years. Electricity demand growth is muted at 1.5-2 per cent for FY26," the report noted.

It also flagged external risks including delay in the US-India trade deal, and global policy changes affecting service exports. Domestic risks encompass subdued export growth, monsoon variability, fiscal constraints, and inflationary pressures from commodity prices.

- IANS

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Reader Comments

R
Rohit P
Good numbers, but I'm a bit worried about the "moderation in exports" part. Our manufacturing needs to be globally competitive beyond just festivals and GST cuts. The US trade deal delay is a real concern. Need long-term policy, not just seasonal boosts.
A
Aman W
CPI inflation projected at 2%? That's the real headline for me. If that holds, RBI keeping rates unchanged makes sense. Lower inflation means more purchasing power for the common man. Fingers crossed the monsoon behaves next year!
S
Sarah B
The report mentions "subdued export growth" as a domestic risk. As someone working in the IT services sector, this is very real. Global policy changes can hit us hard. We need to diversify our export markets beyond the US and Europe.
V
Vikram M
Construction and cement growth projections look solid. This is the backbone of infrastructure development. Hope the growth is inclusive and reaches the small contractors and laborers. The seasonal pick-up after monsoon is always a relief for this sector.
K
Kavya N
While the headline number is great, I respectfully disagree with the overly optimistic tone. The report itself flags so many risks - monsoon, fiscal constraints, global trade. Growth easing below 7% in H2 is a warning. Let's be cautiously optimistic, not complacent.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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