The Indian economy is likely to grow at the rate of 6.5-7% despite many headwinds and geo-political turbulence, predict economists. Economists believe that rural demand and government capital expenditure will help keep the growth at over 6.5%. The Reserve Bank of India (RBI) had projected the growth to be 6.5% during the quarter.
State Bank of India (SBI) projected the growth to be at 7%, while ICRA projected 6.7%, IDFC First Bank estimated 6.9%, while Bank of Baroda estimated the growth to remain between 6.4-6.5%. While the gross domestic product (GDP) for this quarter is likely to remain between 6.5-7%, the gross value added (GVA) will remain between 6.3- 6.5%. However, there could be some slowdown in industrial GVA. ICRA pegs the industrial GVA growth to decline to 4.0% in Q1 FY2026 from 6.5% in Q4 FY2025, with excess rainfall affecting mining and electricity sectors.
Gaura Sen Gupta, chief economist, IDFC First Bank, said: “From the expenditure side, growth is supported by rural demand and government capital expenditure. Meanwhile, urban demand has likely remained weak, reflecting muted urban wage growth.”
With the looming US tariff and ongoing geo-political turmoil, there were fears of Indian growth being affected in the coming quarters. However, economists suggest that the bilateral tariffs are unlikely to have a negative impact on exports, due to front-loading of exports to the US. Despite sustained growth predictions, economists raised some concerns regarding private investment. State Bank of India (SBI) in its research report on Indian GDP for this quarter flags muted private capex as a major concern for sustainable growth.
SBI stated in its report: “Private investment must complement public investment to take the economy onto an even higher sustainable growth path: private investors need to hold the baton now, going globally competitive.”
The finance ministry in its July Economic Review meeting said that fiscal performance during Q1 of FY26 reflects a strong capex push, with robust growth in capital expenditure alongside healthy revenue growth driven primarily by non-tax receipts.
Despite the sustained growth projection for this quarter, economists cautioned an eventual slowdown. “Amidst continuing tariff-induced uncertainty for exports and private capex, we fear that growth will taper off in the subsequent quarters, which would limit the expansion in India’s GDP to 6.0% in FY2026,” said Aditi Nayar, Chief Economist, ICRA.