India's Real GDP to Grow at a Rate of 6.5% in FY26: RBI Annual Report According to RBI's report, the strength of India's macroeconomic fundamentals, pointing to resilient domestic demand, rising investment activity, and continued momentum in services and manufacturing
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India is poised to remain the world's fastest-growing major economy in FY2025–26, with the Reserve Bank of India (RBI) projecting a real GDP growth rate of 6.5 per cent. Despite global uncertainties and financial volatility, the central bank described the risks to this forecast as "evenly balanced."
According to RBI's "2024–2025 Annual Report" released on Thursday, the strength of India's macroeconomic fundamentals, pointing to resilient domestic demand, rising investment activity, and continued momentum in services and manufacturing. "Looking ahead to 2025-26, the Indian economy is well-positioned to sustain strong growth, supported by momentum in investment activity and improving consumption demand," it stated.
Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat said, "Financial stability, inflation management and sustainable development are key themes that emerge from the RBI financial stability report for 2024-25. With global demand being subdued and domestic consumption and investment expected to drive economic growth, the financial services ecosystem will need to play a larger role as an enabler for overall growth and hence innovation and sustainable development will play a key role going forward."
The revival in consumption, paired with the Centre's focus on capital expenditure while maintaining fiscal prudence, is expected to anchor growth. The government has allocated 4.3 per cent of GDP toward effective capital spending in FY26, with an additional INR 1.5 lakh crore to support state-level infrastructure outlays. The fiscal deficit target has been narrowed to 4.4 per cent, reinforcing the broader consolidation path.
Private investment is gaining traction, driven by healthy balance sheets of banks and corporates. The report noted signs of rural consumption recovery and renewed manufacturing expansion, suggesting a "durable domestic demand revival" that will underpin the economy's growth engine.
The services sector, already a key contributor, continues to power ahead. "The services sector has emerged as a mainstay of growth, contributing significantly to value addition and employment," the RBI noted. Growth here is being propelled by digital adoption, expanded financial access, and robust demand for technology-led services.
Agriculture is also expected to post strong performance in FY26, aided by an above-normal monsoon forecast and several new policy interventions. "The prospects for agriculture sector appear favourable… Various new initiatives have been announced for boosting agriculture sector," the report said, citing schemes such as PM Dhan-Dhaanya Krishi Yojana and expanded credit under Kisan Credit Card.
Inflation is projected to moderate to four per cent, though the RBI flagged weather-related food price volatility as a key risk. In response, the central bank adopted an accommodative stance in April 2025, cutting the repo rate by 25 basis points to six per cent.
The manufacturing sector is set to benefit from the Production Linked Incentive (PLI) scheme and the National Manufacturing Mission. These initiatives are expected to reinforce the 'Make in India' push, boost capacity utilisation, and stimulate job creation.
Energy and climate commitments also feature prominently in the report. India aims to ramp up nuclear capacity to 100 GW by 2047, with new support for Small Modular Reactors and rooftop solar initiatives. States have also been granted extra borrowing room for power sector reforms.
The central bank highlighted India's external resilience, pointing to a sustainable current account deficit supported by services exports and remittances. However, it warned of persistent challenges from trade fragmentation and geopolitical tension. The RBI also reiterated its push for internationalising the rupee and fostering local currency trade with partners like Maldives and Mauritius.
On the financial front, while markets remain stable, the RBI called for more robust interest rate risk management and funding diversification, especially among non-banking financial companies (NBFCs). It also flagged the need for improved corporate governance and risk oversight.
