RBI Boosts India's GDP Growth Forecast to 7.3% for 2025-26: What’s Driving This Surge?

The Reserve Bank of India has raised its GDP growth forecast for the Indian economy to 7.3% for 2025-26, citing strong agricultural prospects and favorable economic conditions. RBI Governor Sanjay Malhotra highlighted the significant growth of 8.2% in Q2 and a drop in inflation to 1.7%. The report outlines various domestic and external factors influencing this optimistic outlook, including GST reforms and robust corporate balance sheets. As the economy navigates global uncertainties, the RBI remains hopeful about sustained growth, projecting balanced risks ahead. Discover more about the factors driving this economic surge.

By Narendra Chaudhary Dec 5, 2025, 11:35 IST

Mumbai: RBI's Optimistic Economic Outlook

The Reserve Bank of India (RBI) has revised its GDP growth prediction for the Indian economy to an impressive 7.3% for the fiscal year 2025-26, up from the previous estimate of 6.8%. This optimistic outlook is attributed to favorable agricultural conditions, ongoing GST rate adjustments, low inflation rates, and robust financial health among corporations and banks.

During a press briefing following the monetary policy committee meeting, RBI Governor Sanjay Malhotra highlighted that the economy experienced a remarkable growth of 8.2% in the second quarter of the current fiscal year, alongside a significant drop in inflation to 1.7%. He referred to this period as a rare 'Goldilocks' phase for the Indian economy.

Malhotra elaborated that domestic factors such as promising agricultural yields, the sustained effects of GST reforms, manageable inflation, and solid financial standings of businesses and banks are expected to bolster economic activities. He emphasized that ongoing reform initiatives would further enhance growth.

On the international front, while services exports are anticipated to remain strong, merchandise exports may encounter challenges. External uncertainties could pose risks to the economic outlook, but the swift conclusion of various trade and investment discussions could present opportunities.

Considering all these elements, the RBI projects real GDP growth for 2025-26 at 7.3%, with estimates of 7.0% for Q3 and 6.5% for Q4. For the first quarter of 2026-27, growth is expected to be 6.7%, followed by 6.8% in Q2. The risks appear to be balanced, according to the RBI Governor.

Malhotra noted that the country's real GDP achieved a six-quarter high of 8.2% growth in Q2:2025-26, driven by strong domestic demand amid global trade and policy uncertainties. On the supply side, real gross value added (GVA) grew by 8.1%, supported by thriving industrial and service sectors. The first half of the fiscal year benefited from tax reforms, lower crude oil prices, increased government capital spending, and favorable monetary conditions due to low inflation.

He also mentioned that high-frequency indicators indicate that domestic economic activity remains stable in Q3, although some leading indicators show signs of weakness. The GST reforms and festive spending have bolstered domestic demand during October and November. Rural demand remains strong, while urban demand is gradually recovering. Investment activity is robust, with private investments gaining momentum due to increased non-food bank credit and high capacity utilization.

On the supply side, agricultural growth is supported by healthy kharif crop yields, improved reservoir levels, and better rabi crop sowing. Manufacturing activities are on the rise, and the services sector continues to grow steadily.