Q1 Gdp Surprise Economists Raise Fy27 Growth Forecasts

The Reserve Bank of India’s (RBI) GDP growth forecast of 6.7% for 2026-27, made on August 5, is looking increasingly conservative, with economists making sharp upward revisions to their predictions after Monday’s blockbuster 7.8% growth print for April-June.

Ranging from 20 basis points to 80 basis points (bps), the growth upgrades made by economists on Monday and Tuesday have been such that the consensus number is now 7.2%, up from 6.7% earlier, according to estimates of 10 economists. Their forecasts are now in the range of 6.9-7.5%.

GDP growth has been higher than 7% in the last three years: 7.3% in 2023-24, 7.2% in 2024-25, and 7.8% in 2025-26. A full-year growth print of over 7% in 2026-27 would make it four years in a row.

According to ANZ economists Dhiraj Nim and Sanjay Mathur, the April-June growth number “marked the 12th consecutive quarter of positive surprise relative to market expectations”.

While the RBI had forecast 7%, market economists were closer to 7.3-7.5%, with only a small number predicting that growth could be as high as 7.8-8%. However, even those who predicted such a high number have made a sharp upward revision to their forecast for 2026-27 as a whole. Soumya Kanti Ghosh, State Bank of India’s Group Chief Economic Adviser, has raised his forecast by 70 bps to 7.3%, having predicted that growth may come in at 8% in April-June.

“GDP growth has continued to surprise on the upside,” said Upasana Chachra and Bani Gambhir, economists at Morgan Stanley, in a note. According to them, the strength in manufacturing and investment activity “aligns with our view of India being on the cusp of a capex up-cycle”.

“The stronger-than-expected April-June data, alongside the robust tracking data for July-September so far, point to sustained growth momentum. Against this backdrop, we raise our FY27 real GDP growth forecast to 7.3% (from 6.7%),” they said.

Those who didn’t raise their growth forecasts admitted there is an upside risk to their predictions. However, some chose to keep their powder dry keeping in mind an expected slowdown in the second half of the year and the risks to the growth outlook.

For instance, ICICI Securities Primary Dealership’s economists led by A Prasanna – who retained their forecast of 7% – see five risk factors for growth in the next three quarters: an unfavourable base effect, crude oil prices, any impact on agriculture growth and rural demand from sub-par rains, and the hit to India’s exports from weaker foreign demand due to tighter financial conditions.

In the same vein, they expect the RBI to also consider interest rate hikes, as signalled by the central bank’s officials in the minutes of the Monetary Policy Committee’s August 3-5 meeting.

“Fiscal policy choices will also be crucial. In case government choses to stick to the fiscal deficit target, and given the front loading on the capex growth front, there could be marginal headwind to demand from that side as well,” they added.

As per the RBI’s own forecast, GDP growth is seen at 6.4% in July-September, 6.5% in October-December, 6.8% in January-March 2027, and 7.3% in April-June 2027.

The RBI’s MPC will next meet October 5-7, where the central bank is expected to raise its own prediction of growth this year.

“The strong GDP data should bolster the MPC’s confidence on growth, and sharpen its focus on inflation,” Nomura’s Sonal Varma and Aurodeep Nandi said. “The key question is whether stronger growth will lead to more demand side inflationary pressures – which have been absent thus far, despite the surge in input costs.”

Data released earlier this month showed headline retail inflation inched up to 4.45% in July from 4.38% in June – the second month in a row it was above the RBI’s medium-term target of 4%. The central bank, which last month left its policy repo rate unchanged at 5.25%, expects inflation to average 4.7% in July-September, 5.9% in October-December, 5.5% in January-March 2027, and 5.3% in April-June 2027.

Siddharth Upasani is a Deputy Associate Editor with The Indian Express. He reports primarily on data and the economy, looking for trends and changes in the former which paint a picture of the latter. Before The Indian Express, he worked at Moneycontrol and financial newswire Informist (previously called Cogencis). Outside of work, sports, fantasy football, and graphic novels keep him busy. ... Read More