The Reserve Bank of India has stated that the country is poised to remain the fastest-growing economy globally in 2025-26, even as the global economic outlook for 2025 and 2026 remains clouded by multiple challenges, including geopolitical tensions, trade tensions, elevated public debt, financial market volatility, and climate shocks.

The RBI has projected real GDP growth for 2025-26 at 6.5 per cent, with growth rates of 6.5 per cent in Q1, 6.7 per cent in Q2, 6.6 per cent in Q3, and 6.3 per cent in Q4.

“The outlook for the Indian economy remains promising in 2025-26, supported by revival in consumption demand, government’s continued thrust on capex while adhering to the path of fiscal consolidation, healthy balance sheets of banks and corporates, easing financial conditions, continuing resilience of the services sector and strengthening of consumer and business optimism, besides sound macroeconomic fundamentals,” RBI said in its annual report.

“However, uncertainty about global trade post-protectionist measures, protracted geopolitical tensions and global financial market volatility pose downside risks to the growth outlook and upside risks to the inflation outlook,” the central bank said.

With inflation falling below the target in February and March 2025, supported by a sharp fall in food inflation, there is now greater confidence about a durable alignment of headline inflation with the target of 4 per cent over a 12-month horizon, the central bank said.

RBI has projected a 4 per cent CPI inflation for 2025-26, with Q1 at 3.6 per cent, Q2 at 3.9 per cent, Q3 at 3.8 per cent, and Q4 at 4.4 per cent.

“The benign inflation outlook and moderate growth warrant monetary policy to be growth supportive, while remaining watchful about the rapidly evolving global macroeconomic conditions,” the annual report said.

The RBI has already lowered the policy rate in two consecutive reviews, and there are expectations of further rate cuts in the current cycle by economists and market analysts to further support economic growth.

Growth expectations

The government is expected to release the provisional estimates of Q4FY25 and FY25 GDP growth numbers on April 30.

“Assuming there are no major revisions in Q1 to Q3 estimates in the upcoming data release by NSO, we expect FY25 GDP to stand at 6.3,” said Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, in a research report.

“While a slowdown of FY25 is already factored in, Q4 growth will likely signal whether growth momentum for FY26 is likely to rebound. We expect growth to range between 6.8-7.2 per cent,
given the growth in high-frequency indicators around services exports, GST collections, and rural demand indicators,” said Rumki Majumdar, economist, Deloitte India.

“The projected real GDP growth of 6.4 per cent in FY25 and 6.5 per cent in FY26 reflects the economy’s underlying strength and resilience, driven by robust domestic demand, sustained government capex, and gradual recovery in private investments,” said Manoranjan Sharma, chief economist at Infomerics Valuations and Ratings Ltd.

Household savings

The gross financial saving of households increased to 11.2 per cent of gross national disposable income (GNDI) in 2023-24 from 10.7 per cent in the previous year.

Net household financial savings improved to 5.1 per cent of GNDI in 2023-24 from 4.9 per cent in the previous year.