After robust H1, economists upgrade full-year FY26 growth forecast to 7.5%

Most economists have raised India's FY26 GDP growth forecast to around 7.5% after a strong first half, citing robust Q2 data, improving credit trends and potential support from a US trade deal

With the first half (H1) gross domestic product (GDP) growth clocking 8 per cent, most economists have now upgraded their full-year 2025-2026 (FY26) growth forecast to 7.5 per cent, or above. 

Group Chief Economic Adviser at State Bank of India Soumya Kanti Ghosh said, assuming 7.5-7.7 per cent growth in Q3 (October-December) and 7 per cent in Q4 (January-March), the overall growth for FY26 would be approximately 7.6 per cent. 

Citing high frequency indicators, SBI in a research note said, credit growth of scheduled commercial banks (SCBs) is slowly picking up in the current financial year and grew by 11.3 per cent for the fortnight ended October 31, compared to 11.8 per cent during the same period. Deposits grew 9.7 per cent from last year’s 11.7 per cent during the same fortnight. “There is a one-way causal relationship between GDP and ASCB (all SCB) credit, with increase in credit leading to higher GDP,” it added. 

Chief Economist at CareEdge Ratings Rajani Sinha said she expected the GDP growth to moderate to around 7 per cent in H2 (October-March) of FY26 as the impact of front loading of exports fades and consumption demand moderates after the festival season.

 

“By the fourth quarter of FY26, the low base effect will wane, and deflator will also increase from the current low levels. 

However, for the full-year FY26, we estimate the GDP growth number to remain strong at 7.5 per cent. Even with the trade-related uncertainties lingering, we expect GDP growth at around 7 per cent in FY27,” she added. 

India’s economy expanded at its fastest pace in six quarters, growing 8.2 per cent during the July-September period of FY26, outstripping both official and private forecasts by a significant margin, data released on Friday by the statistics ministry showed.  Most economists had expected Q2 GDP expansion to fall within the 7-7.5 per cent range; the Reserve Bank of India (RBI) had projected 7 per cent growth. 

Chief Economist at IDFC First Bank Gaura Sen Gupta said incorporating stronger than expected Q2 print, full-year FY26 real GDP growth is revised-up to 7.6 per cent from 6.8 per cent previously. “The estimate also incorporates upward revision in Q3FY26 GDP to 7.4 per cent, with high frequency indicators showing pick-up in consumption supported by GST cuts. The key drag on growth in H2FY26 is expected to be from elevated tariffs and lower support from government expenditure,” Sen Gupta said. However, she added that in case India seals a trade deal with the US by December 2025, this would result in upward revision in Q4 growth. “Full- year GDP growth would be closer to 8 per cent in such a scenario,” she added. 

Motilal Oswal, in a research note, revised its real GDP growth forecast for FY26 to a base case of 7.5 per cent from 7 per cent earlier. “What remains to be seen is if the consumption-led pickup witnessed during October-November fizzles out in Q4. The global tariff situation also remains a key monitorable,” it added. 

After the strong Q2 growth and assuming a favourable trade deal announcement with the US before the end of 2025, Sakshi Gupta, principal economist at HDFC Bank, said she has upgraded her FY26 growth forecast to 7.3 per cent from 6.8 per cent earlier. 

“Going forward, we expect H2 GDP growth to average close to 6.6 per cent as the favourable base effect fades, government spending momentum moderates (after frontloading in H1), and drag from US tariffs (in absence of a trade deal) and slowdown in global growth – that is yet to play out fully-weighs on exports,” she added.