Archive · 1 Sep 2026
India's Strong Q1 GDP Raises FY27 Growth and Rate-Hike Expectations
India’s economy grew faster than expected in the April-June quarter.
It expanded by 7.8%, even though growth was slower than in the previous quarter.
Businesses investing, strong services, exports and consumer spending helped the economy.
Because the start of the financial year was strong, several economists now expect growth of 7% to 7.5% for FY27.
The RBI has a more cautious forecast of 6.7%.
Risks include the war in West Asia, higher energy prices, bad weather and rising inflation.
Economists think the RBI may raise interest rates to help manage inflation.
One forecast expects two rate increases of 25 basis points each, starting in December.
India’s GDP grew 7.8% in the April-June quarter, exceeding the RBI’s 7% projection.
Investment, services, exports and private consumption supported economic activity during the quarter.
Several economists raised FY27 growth forecasts to between 7% and 7.5%.
The RBI still projects 6.7% FY27 growth amid geopolitical, weather and inflation risks.
Economists expect the RBI to raise its 5.25% repo rate by about 50 basis points in FY27.
- Who
- India’s economy, economists, and the Reserve Bank of India’s Monetary Policy Committee.
- What
- April-June GDP growth reached 7.8%, prompting higher FY27 growth forecasts and expectations of RBI rate increases.
- When
- The data covers the April-June quarter; economists’ rate-hike expectations concern FY27, with ANZ expecting the first increase in December.
- Where
- India.
- Why
- Growth exceeded expectations, while inflation and other supply-side risks are increasing; economists therefore see stronger growth and possible monetary-policy normalisation.
Higher-growth outlook
Cautious outlook
FY27 economic growth
Higher-growth outlook
Economists at Morgan Stanley, State Bank of India, CareEdge Ratings, HDFC Bank and India Ratings and Research raised their forecasts to 7%–7.5%, citing the strong start to FY27.
Cautious outlook
The RBI continues to project 6.7% growth, while economists acknowledge that geopolitical tensions, weather uncertainty, higher energy prices and inflation could slow activity.
Interest-rate direction
Higher-growth outlook
Economists expect resilient growth and elevated inflation to allow the RBI to raise the repo rate by about 50 basis points in FY27; ANZ expects two 25-basis-point increases, beginning in December.
Cautious outlook
The article does not report a contrary rate decision from the RBI; its 6.7% growth forecast and projected moderation indicate a more cautious official outlook.
- April-June GDP growth
- 7.8%, compared with 8.6% in the March quarter
- RBI April-June projection
- 7%
- Revised FY27 growth forecasts
- Economists’ estimates range from 7% to 7.5%
- RBI FY27 growth forecast
- 6.7%, with quarterly growth projected between 6.4% and 6.8% for the next three quarters
- Current repo rate
- 5.25%
- Expected FY27 rate increase
- Around 50 basis points, according to several economists
- Revised previous growth figures
- FY26: 7.8%; FY25: 7.2%; FY24: 7.3%