India's GDP growth likely at 6.3% in FY26, below RBI estimates: SBI report

The report pegged the first quarter GDP estimate at around 6.8-7%, mainly due to muted private capex

India's economic growth is expected to be lower at 6.3 per cent this fiscal compared to the RBI's projection of 6.5 per cent, a SBI Research Report said on Thursday.

The report pegged the first quarter GDP estimate at around 6.8-7 per cent, mainly due to muted private capex.

India's economy is likely to grow at 6.3-6.8 per cent in 2025-26 on the back of strong macroeconomic fundamentals, though strategic and prudent policy management will be required to navigate global headwinds, as per the latest Economic Survey.

The country witnessed a muted growth at 6.5 per cent in 2024-25 (April 2024 to March 2025), down from 9.2 per cent in the previous year.

 

Sharing the quarterly growth estimates, the report said the Indian economy is expected to grow at 6.5 per cent in the second quarter and at a lower rate of 6.3 per cent in the next quarter.

In the fourth quarter of the current financial year, the GDP growth will be lowest at 6.1 per cent, it added.

Compared to the SBI report, the Reserve Bank has projected real GDP growth at 6.5 per cent in Q1, Q2 at 6.7 per cent, Q3 at 6.6 per cent, and Q4 at 6.3 per cent.

Talking about headwinds, the report said a major source of concern for sustainable growth is the muted private capex.

"Data based on a survey of 2,170 enterprises (conducted during April 2025), ranging from Agri, Manufacturing, IT, etc., has indicated that the intended capex for FY26 is significantly lower than the FY25 numbers...we believe that numbers may further decline as US tariffs may significantly impact the capex," the report said.

The impulse response of government capital expenditure to its own structural shock demonstrates strong persistence, it said, adding that the estimated response exhibits an immediate positive jump, followed by short-term oscillations, and subsequently converges to a stable positive level.

Public capital expenditure is not a transitory or noise-driven component of fiscal policy, but a persistent driver reinforcing its role as a structurally sustainable element in the expenditure composition, the report added.

With regard to loan growth, it said the banks' credit growth slowed to 10 per cent as of July 25, 2025, compared to last year's growth of 13.7 per cent.

On the other hand, aggregate deposits grew by 10.2 per cent against the growth of 10.65 per cent year-on-year.

The sectoral credit growth for June 2025 indicated that credit growth declined across sectors, except SME, it said, adding that SME credit increased by 21.8 per cent year-on-year compared to last year's growth of 14.2 per cent, it said.

With the imposition of tariffs by the US, "we may see an effect in revenue and margin pressure in export-oriented tariff-affected sectors, such as Textile, Gems and Jewellery, leathers, Chemicals, Agriculture, Auto Components, etc, in Q2", the report said.