Ind-Ra Raises GDP Growth Forecast To 7 PC In FY26

Against the July forecast of 6.3 per cent, the November projection expects a growth of 7 per cent. The uncertain global scenario due to the US unilateral tariff hikes and sluggish urban demand were major headwinds as seen in July. Both domestic and global landscapes have changed significantly since our last forecast in July 2025, it said.

A faster-than-expected inflation decline, increasing the real wage rate, especially in rural areas and GST rationalisation are now seen supporting growth. The impact of US tariff hike on global growth and trade is lower than estimated earlier.

Private final consumption expenditure (PFCE) is expected to grow 7.4 per cent in FY26 against 6.9 per cent in July 2025 forecast driven by GST rationalisation and lower inflation. While vehicle and other consumer durable sales grew during September-October 2025, it is unlikely to continue in the rest of the fiscal.

However, a sustained decline in inflation has bolstered real wage growth. Real wage growth in urban areas, which was negative in 3QFY25, turned positive in 4QFY25 and has remained so in 1QFY26, contributing to consumption stability. GST rationalisation is expected to keep real wage growth positive at least till 2QFY27.

Meanwhile, capex by the central government and central public sector enterprises was strong in H1 FY26. State government capex growth has also contributed to public sector capex and is likely to continue in the rest of FY26.

A faster Indo-US trade deal and favourable weather conditions during winter months have the potential to push GDP growth higher than 7 per cent. However, if the demand revival in terms of consumption and investment is weaker than expected, it could pull down GDP growth, finds Ind-Ra.