The Reserve Bank of India (RBI) on Wednesday announced significant adjustments to its economic outlook, increasing the projected GDP growth rate for the fiscal year 2025-26 to 6.8 percent and reducing its inflation forecast to 2.6 percent. This change stems from favorable monsoon conditions and the rationalisation of Goods and Services Tax (GST) rates.
Previously, in August, the RBI had estimated a 6.5 percent growth rate alongside an inflation projection of 3.1 percent. The revisions came during the bi-monthly monetary policy announcement made by RBI Governor Sanjay Malhotra.
Malhotra noted that significant developments in India’s domestic economy, set against a dynamic global economic backdrop, have shifted the growth-inflation narrative. “Buoyed by a good monsoon, the Indian economy continues to exhibit strength with a higher growth rate in the first quarter of 2025-26,” he explained. He added that there has been a remarkable moderation in headline inflation amid these conditions.
Discussing the impact of the GST adjustments, the Governor stated, “The rationalisation of GST rates is likely to have a sobering impact on inflation while stimulating consumption and growth.” However, he also pointed out that tariffs imposed by the United States are likely to restrain export growth.
Governor Malhotra detailed the breakdown of the GDP growth projection, indicating expectations of **7.0 percent** for the second quarter, **6.4 percent** for the third quarter, and **6.2 percent** for the fourth quarter of 2025-26. He also anticipated a growth rate of **6.4 percent** for the first quarter of 2026-27.
Inflation conditions in India have remained relatively benign, according to Malhotra. “The actual inflation has significantly outperformed our earlier projections,” he remarked, attributing low inflation rates primarily to a dramatic decline in food inflation resulting from enhanced supply conditions and effective government measures to strengthen supply chains.
Core inflation has remained stable, with the August figure recorded at **4.2 percent** despite ongoing price pressures in precious metals sectors.
For the upcoming quarters, the RBI projects a Consumer Price Index (CPI)-based inflation rate of 2.6 percent for 2025-26, with a detailed forecast of **1.8 percent** for both the second and third quarters, and rising to **4.0 percent** in the fourth quarter. For the first quarter of 2026-27, the CPI inflation is estimated to be **4.5 percent**.
Overall, the RBI’s latest predictions reflect a more optimistic economic outlook for India amid favourable agricultural conditions and strategic adjustments in taxation. As always, the central bank will continue monitoring global economic shifts that could influence these forecasts.
