ICRA Projects India's Q1 FY26 GDP Growth at 6.7%, Surpassing RBI's 6.5% Forecast

Rating agency ICRA has projected India's economic growth at 6.7% for the April-June quarter of FY26, surpassing both the previous year's 6.5% growth and the Reserve Bank of India's Monetary Policy Committee forecast of 6.5%. The optimistic projection is driven by robust government capital expenditure and strong export performance.

Government Capex Surge Powers Q1 Growth Momentum

ICRA Chief Economist Aditi Nayar attributed the growth to front-loading of government capital expenditure, which spiked 52% year-on-year to ₹2.8 lakh crore in the June quarter. The value of new project announcements nearly doubled to ₹5.8 lakh crore from ₹3 lakh crore in Q1 FY25. 

Services Sector Reaches Eight-Quarter High of 8.3%

The services sector is expected to drive growth with an 8-quarter high of 8.3%, up from 7.3% in the previous quarter. However, this strong performance is offset by industrial growth slowing to 4.0% from 6.5% and agriculture growth moderating to 4.5% from 5.4%. Gross Value Added (GVA) is projected to ease to 6.4% in Q1 FY26 from 6.8% in Q4 FY25.

Read More: S&P Upgrades India's Rating to BBB, First Time in 18 Years!

Export Front-loading and Consumption Signals Support Growth

"Benefitting from robust government capital as well as revenue spending, upfront 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%," Nayar stated, as per news reports.. The improvement in indirect taxes, growing 11.3% in Q1 FY26 versus contracting 3.1% in Q4 FY25, further supports the growth trajectory.

Caution for Subsequent Quarters Amid Tariff Uncertainties

Despite the positive Q1 outlook, ICRA cautioned about potential GDP growth tapering in subsequent quarters due to continuing tariff-induced uncertainty affecting exports and private capital expenditure. This could limit India's GDP expansion to 6% for the current fiscal year. Official Q1 FY26 GDP data is scheduled for release on August 29, 2025.

Conclusion

ICRA's 6.7% Q1 FY26 GDP growth projection, exceeding RBI's 6.5% forecast, reflects strong government capital expenditure support and export performance. 

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