Key Points

The upward revision reflects expectations of monetary easing and stronger domestic demand from GST rate rationalisation amid global uncertainties, according to EY's Economy Watch September edition.

"With Q1 FY26 real GDP growth at 7.8 per cent and stimulation of demand through GST reforms on the one hand, constrained by global headwinds affecting India's export prospects, both in goods and services, we expect India to still show an annual real GDP growth of 6.7 per cent in FY26," according to the global professional services firm.

"With GST 2.0 reforms boosting disposable incomes and domestic demand, and trade diversification efforts opening new opportunities, India is well positioned to sustain its growth momentum in FY26. Strategic investments in technology and targeted policy measures will be key to translating reforms into long-term economic gains," said DK Srivastava, Chief Policy Advisor at EY India.

In August 2025, manufacturing PMI increased to 59.3, its highest level since February 2008. Services PMI also increased to 62.9, its highest level since June 2010.

Overall IIP growth improved to 3.5 per cent in July 2025 from 1.5 per cent in June 2025, led by significant improvement in the growth of manufacturing output.

"Led by fading base effects and a moderation in the pace of contraction in food prices, CPI inflation increased from 1.6 per cent in July 2025 to 2.1 per cent in August 2025 whereas core CPI inflation rose from 4.2 per cent to 4.3 per cent during the same period," the report mentioned.

WPI inflation turned positive at 0.5 per cent in August 2025 as compared to (-)0.6 per cent in July 2025, reflecting higher inflation in vegetables on account of both weakening of favourable base effects and some uptick in price of tomatoes.

As per the OECD, India's seasonally adjusted quarterly real GDP growth at 7.3 per cent during April-June 2025 was the highest among all G20 economies.

- IANS