The ’s Monetary Policy Committee (MPC) on Friday raised its GDP growth projection for FY2025-26 to 7.3%, up from the earlier estimate of 6.8%.
For Q3 FY26, the increased its growth outlook to 7.0% from 6.4%, and for Q4 FY26, it revised the estimate to 6.5% from 6.2%. The committee also raised its forecast for Q1 FY27 to 6.7% from 6.4%, while projecting growth for Q2 FY27 at 6.8%.
GDP expanded by 7.8% in the previous quarter and 5.6% in the corresponding quarter last year, indicating that the low base also contributed to a statistical lift.
“Looking ahead, domestic factors such as healthy agricultural prospects, continued impact of GST rationalisation, benign inflation, healthy balance sheets of corporates and financial institutions and congenial monetary and financial conditions should continue to support economic activity. Continuing reform initiatives would further facilitate growth,” said Governor Malhotra.
What’s behind the upward revision?
The revision comes on the back of India’s stronger-than-expected performance in Q2 2025-26. The economy expanded by 8.2% in the July–September quarter, beating the RBI’s earlier estimate of 6.8% and recording the fastest pace in six quarters. Nominal GDP rose by 8.7% in Q2, marginally lower than the 8.8% growth seen a year earlier.
Even with the upward revisions, the notes that the risks to its forecasts remain evenly balanced, suggesting a stable growth outlook.
“Although GDP growth has been higher than the RBI’s forecasts, it is expected to moderate to 6.5-7 per cent in the coming quarters. This still leaves room for pursuing a higher and, as the Governor has previously described, more aspirational growth trajectory,” said Vikram Chhabra, Senior Economist, 360 ONE Asset.
RBI cuts repo rate by 25 bps
The central bank’s MPC unanimously voted to reduce the repo rate by 25 basis points to 5.25%, while keeping its stance neutral. On Friday, December 5, Governor Sanjay Malhotra announced the cut, citing historically low inflation levels.
Governor Malhotra said the MPC reached a unanimous decision to reduce the repo rate by 25 basis points, noting that inflation is comfortably low at 2.2% and economic growth has hit 8% in the year’s first half — a combination he described as a rare “Goldilocks” scenario.
“The MPC voted unanimously to reduce the policy repo rate by 25 basis points (bps) to 5.25 per cent with immediate effect,” Malhotra said.
The Standing Deposit Facility (SDF) rate under the Liquidity Adjustment Facility (LAF) has been revised to 5%, while the Marginal Standing Facility (MSF) rate and the Bank Rate have been set at 5.50%.