India’s Q1 FY26 Growth Surpasses RBI Forecast

India’s economy likely expanded by 6.8-7% in the first quarter (April-June) of FY26, outpacing the Reserve Bank of India’s (RBI) estimate of 6.5%, according to a State Bank of India (SBI) report released Wednesday. The report’s nowcast model projects a GDP growth of 6.9% year-on-year, with Gross Value Added (GVA) at 6.5%, driven by robust domestic consumption and government infrastructure spending of ₹11.21 lakh crore, as noted in recent budget announcements.

The SBI report highlights that Q1 FY26 growth aligns with the medium-run trajectory, supported by consistent factor dynamics. Posts on X, like one from @EconWatchIndia, praised the “resilient services sector growth at 8.3%,” contributing to the strong performance. However, the report forecasts a full-year FY26 GDP growth of 6.3%, slightly below the RBI’s 6.5% target, citing a 0.2 percentage point reduction for Q2-Q4 due to potential global trade headwinds.

A notable trend is the narrowing gap between real and nominal GDP growth, dropping from 12 percentage points in Q1 FY23 to 3.4 in Q4 FY25. With inflation at historic lows and a declining GDP deflator, the gap is expected to shrink further in Q1 FY26, with nominal GDP growth at 8%. The report warns that this could obscure a slight slowdown in momentum. Economist Dr. Anjali Verma commented on X, “Low inflation is a double-edged sword—boosts real growth but masks nominal challenges.” As India navigates global uncertainties, sustained reforms and capex are critical to maintaining this growth trajectory.

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