RBI Lifts GDP Growth Forecast to 7.4% as Demand Holds

India’s economy just received a quiet but confident vote of faith from its central bank. The Reserve Bank of India raised its GDP growth forecast for the current fiscal year to 7.4%, signaling that domestic demand remains strong even as global risks deepen. The upgrade came alongside steady interest rates and a brighter early view of next year, offering clues on how policymakers see India navigating an uneasy world.

RBI raises GDP growth forecast amid steady demand

The Reserve Bank of India announced the revised outlook during its first monetary policy review of 2026 on February 6. RBI Governor Sanjay Malhotra said the central bank now expects the economy to expand by 7.4% in the current fiscal year, up from the 7.3% projected in December.

The revision may look modest, but it carries weight. It reflects the RBI’s assessment that consumption, investment, and credit growth are holding up better than earlier expected, despite slowing global trade and volatile financial markets.

The RBI made it clear that India’s growth story is being driven more by domestic strength than by external demand.

The central bank also upgraded its early outlook for the next fiscal year. Real GDP growth is now projected at 6.9% in the first quarter of FY27 and 7% in the second quarter, compared with earlier estimates of 6.7% and 6.8%.

Interest rates stay unchanged as risks linger

Alongside the growth upgrade, the RBI kept interest rates unchanged. The decision comes at a time when major central banks remain cautious, and global markets continue to react to shifting trade policies, geopolitical tensions, and uneven inflation trends.

For India, the RBI said rate stability was justified by the resilience of domestic demand and the need to avoid unnecessary shocks to growth. While global uncertainties remain elevated, the central bank believes current monetary settings are appropriate to balance growth and price stability.

One sentence stood out in the policy communication. The RBI emphasized that domestic demand continues to provide a reliable cushion against global headwinds.

By holding rates steady, the central bank signaled that it prefers to watch how global risks evolve rather than respond preemptively. This approach also gives businesses and households greater certainty when making spending and investment decisions.

What the new GDP outlook says about FY27

The RBI’s revised projections for early FY27 offer an important signal about the medium term path of the economy. The central bank sees growth strengthening sequentially, supported by consumption, public spending, and improving private investment.

Here is how the outlook has changed.

These numbers suggest that the RBI expects momentum to carry into the next fiscal year rather than fade. That matters for markets, companies, and policymakers who track whether India can sustain high growth without overheating.

The central bank also noted that credit conditions remain supportive and balance sheets across banks and large firms are healthier than in previous cycles.

New GDP and inflation series to reshape data

The RBI confirmed that a new series for GDP and inflation will be released in the coming days. While the central bank did not provide detailed timelines, it acknowledged that the updated series could recalibrate key macro indicators going forward.

Such changes typically affect how growth, inflation, and productivity are measured over time. Economists and investors will closely study the new data to see whether historical trends look different under the revised framework.

For now, the RBI stressed that the underlying growth drivers remain intact. Private consumption is expected to maintain momentum into the next year, supported by urban demand and improving rural conditions.

This is an area to watch closely. A new data series can change perceptions even if the real economy stays on the same path.

Budget measures add support to growth outlook

The RBI’s optimism is also linked to recent policy signals from the Union Budget. The central bank pointed to higher public spending on infrastructure, continued manufacturing incentives, and efforts to crowd in private investment as key supports for medium term growth.

These measures aim to strengthen supply capacity while keeping demand firm. Infrastructure spending, in particular, has spillover effects across sectors like steel, cement, logistics, and employment.

The RBI has repeatedly highlighted that India’s banking system is in a stronger position to support growth than in the past. Lower stress levels and better capital positions allow banks to extend credit without taking excessive risks.

According to the central bank, this combination of fiscal support and financial stability reduces the economy’s exposure to sudden external shocks.

India stands apart in a slowing global economy

Globally, the picture looks far less certain. Growth in major economies has slowed, trade flows remain uneven, and financial markets continue to react sharply to policy signals from advanced economies.

Against this backdrop, the RBI’s outlook stands out. The central bank argues that India’s growth drivers are increasingly domestically anchored, making the economy less vulnerable to global swings.

Government estimates broadly align with this view. Official projections for the next fiscal year place growth in the range of 6.8% to 7.2%, supported by resilient demand and steady investment activity.

This alignment between fiscal authorities and the central bank adds credibility to the overall outlook, even as external risks remain.

At the same time, policymakers have been careful not to sound complacent. The RBI acknowledged that global trade uncertainties and financial volatility could still affect sentiment and capital flows.

Why this matters for households and businesses

For households, steady growth and unchanged interest rates mean relative stability. Borrowing costs are unlikely to rise sharply in the near term, while job creation and income growth could benefit from sustained economic momentum.

For businesses, the message is one of cautious confidence. The RBI is not signaling aggressive easing, but it is also not tightening policy in response to global fears. That balance supports long term planning and investment decisions.

The growth upgrade sends a clear signal that India’s economy is proving more resilient than many expected.

The real test will come over the next few quarters, as global conditions evolve and the impact of budget measures feeds through the economy. For now, the RBI’s message is simple and steady: domestic strength remains the backbone of India’s growth story.

As India moves deeper into 2026, do you agree with the RBI’s confidence in domestically driven growth? Share your views and pass this story along to spark the conversation.