India is expected to grow by 6.7 percent in the first quarter of the current fiscal year (FY26), exceeding the RBI Monetary Policy Committee's (MPC) most recent forecast of 6.5 percent, credit rating agency ICRA said on Tuesday.
According to the rating agency report, gross value added (GVA) will grow by 6.4 percent in Q1 FY2026.
Key Highlights
- RBI forecasts India’s GDP growth at 6.7% in Q1 FY26, matching fiscal-year estimate.
- ADB flagging strong domestic demand, urban consumption, and rural incomes to drive projected 6.7% GDP growth.
The report stated that improved transmission of monetary easing, as well as the recent announcement of upcoming GST rationalization, may help to shore up urban consumption sentiments ahead of the festive season.
"ICRA estimates a double-digit growth in net indirect taxes (in nominal terms), aided by the sharp increase in the government of India's indirect taxes (+11.3 percent in Q1 FY26 from -3.1 percent in Q4 FY2025), despite the narrower contraction in its subsidy outgo," said Aditi Nayar, Chief Economist, Head-Research and Outreach, ICRA.
"Benefiting from robust government capital and revenue spending, upfronted exports to some geographies, and nascent signals of improved consumption, the pace of expansion in economic activity in Q1 FY2026 is estimated at 6.7%," Aditi Nayar stated.
Also Read: Deloitte Forecasts FY26 GDP Growth at 6.4-6.7% on Strong Domestic Demand
The rating agency expects YoY growth in services GVA to reach an eight-quarter high of 8.3 percent in Q1 FY26, up from 7.3 percent in Q4 FY25, supporting overall GVA growth in that quarter. In Q1 FY26, the combined non-interest revenue expenditure of 24 state governments increased by 10.7% year on year, up from 7.2% in Q4 FY25.
Similarly, the Central government's non-interest revenue expenditure increased by 6.9 percent year on year, compared to a contraction of 6.1% in the previous quarter, the report stated.
Rural sentiments, as measured by the Current Situation Index (CSI), improved further in the July 2025 (100.6) round of the RBI's Rural Consumer Confidence Survey, reflecting positive trends in farm output over the last two cropping seasons, an optimistic outlook for the current kharif season, and a significant cooling in rural CPI inflation.
