India's FY26 GDP Growth Forecast Revised Upwards to 7.5% by CareEdge

CareEdge Ratings has upgraded India's GDP growth estimate for FY26 to 7.5% from the previously projected 6.9%, attributing the upward revision to stronger-than-expected growth in the first half (H1) of the fiscal year.  

Several key drivers contributed to this improvement, including robust agricultural output, festive demand, and tax reforms. 

Upward Revision Driven by Solid First-Half Growth 

The GDP growth revision to 7.5% follows encouraging data from the first half of FY26. Multiple factors aided this momentum, such as front loading of exports, rationalised GST rates, and a cut in the repo rate during the earlier part of the fiscal.  

The reduced income tax burden and strong rural economic activity further supported aggregate demand. 

Moderation Expected in H2 Due to Base and Consumption Factors 

Despite the upgrade, a moderation in economic activity is anticipated in the second half of FY26. Factors such as the fading impact of festive spending and export front-loading, along with diminishing low base effect by Q4FY26 and rising GDP deflator values, are expected to contribute to the slowdown. 

Rupee Outlook and Nominal GDP Estimates 

CareEdge projects the Indian rupee to trade within the ₹89 to ₹90 range against the US dollar in FY27. The nominal GDP growth is estimated at 8.3% for FY26, which is below the budgeted projection of 10.1%. 

Read More: NITI Aayog Unveils Roadmap to Deepen India’s Corporate Bond Market! 

Fiscal Deficit Target and Revenue Trends 

The central government's fiscal deficit target of 4.4% for FY26 is expected to be met, despite a weaker tax revenue growth of 4% in the first seven months compared to the budgeted 12.5%. This shortfall was mitigated by a substantial ₹2,70,000 crore dividend transfer from the Reserve Bank of India and restrained revenue expenditure. 

FDI Trends and Industrial Activity 

While net FDI outflows were noted due to high repatriation, gross inflows remained robust. Key sectors attracting investment include electronics, data centres, renewable energy, EVs, and AI infrastructure. Capacity expansion indicators show positive trends in capital goods sectors based on strong order book growth. 

Conclusion 

The revised GDP growth forecast for FY26 reflects the strength of India's economic performance in the first half, supported by strategic policy measures and sectoral resilience. While a slowdown is anticipated in the latter half, various indicators continue to demonstrate economic stability. 

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