ICRA Sees India’s Q1 FY26 Growth at 6.7%, Surpassing RBI's 6.5% Forecast

India’s economy has delivered a strong start to fiscal year 2025-26, with growth exceeding earlier forecasts and reinforcing confidence in the nation’s economic trajectory.

Q1 GDP Growth Tops Forecasts

Credit agency ICRA estimates that India’s GDP grew by 6.7% in the first quarter of FY26, surpassing the Reserve Bank of India’s Monetary Policy Committee (MPC) projection of 6.5%. This gain was driven by factors such as vigorous government spending, early export gains, rising consumption signals, and a marked increase in tax collections. On the tax front, net indirect taxes jumped by an impressive 11.3% year-on-year, reversing the 3.1% contraction in Q4 FY25.

The services sector also showed exceptional strength, with Gross Value Added (GVA) growth expected at 8.3%, the highest in eight quarters and up from 7.3% in the previous quarter. Non-interest revenue spending among 24 states climbed to 10.7% year-on-year, accelerating from 7.2% in Q4 FY25, while central government non-interest revenue rose to 6.9%, after a 6.1% drop.

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ICRA also highlighted rising urban consumption, driven by expectations of GST rationalisation and effective monetary policy transmission. Rural confidence improved as well, with the RBI’s July Rural Consumer Confidence Index (Current Situation Index) rising to 100.6, buoyed by strong kharif harvests, optimistic rural sentiment and easing inflation.

Full-Year Forecasts Remain Solid

Earlier in August, Deloitte India projected robust economic growth of 6.4–6.7% in FY26, supported by resilient domestic demand and strategic trade initiatives, including talks with the U.K., ongoing U.S. dialogue, and a potential deal with the E.U. before year-end.

RBI Confidence and Inflation Control

Meanwhile, monetary policymakers remain upbeat. RBI MPC member Nagesh Kumar stated that India, anchored by domestic demand and investment, remains a bright spot globally and is well-positioned to exceed 6.5% growth in FY26, with potential to climb toward 7–7.5% in the coming years.

Conclusion

India’s economy has begun FY26 on a strong footing. With Q1 growth surpassing expectations, pro-growth government spending, improved consumer confidence, and healthy GVA activity, most forecasts continue to point toward a stable full-year expansion in the 6.4–6.7% range. If maintained, this momentum positions the country among the fastest-growing major economies globally.