RBI Revises GDP Forecast: Sees 6.8% Growth in FY 2025-26, Inflation Expected to Drop to 4%

India’s central bank revises its growth and inflation projections in the October 2025 Monetary Policy Report, hinting at stronger domestic demand and stable prices.

In 2024, many traders feared that high prices and global slowdown might slow down India’s recovery. But the story has turned around. 

The Reserve Bank of India (RBI), in its Monetary Policy Report released on 4 October 2025, has raised the GDP growth forecast for the financial year (FY 2025-26) to 6.8 percent, while lowering the inflation forecast to 4 percent. The RBI has also kept the repo rate unchanged at 6.5 percent, demonstrating its confidence in the economy’s stability.

This change in the forecast has caught the attention of financial circles. It suggests that India’s economic momentum remains strong despite a mixed global environment.

RBI GDP Growth Forecast 2025 Update

The RBI Monetary Policy Committee (MPC) meeting held in Mumbai projected that India’s GDP growth will reach 6.8 percent in FY 2025-26. This is up from the earlier estimate of 6.5 percent announced in April 2025.

According to the October 2025 Monetary Policy Report, the revision reflects stronger-than-expected performance in the manufacturing and service sectors, supported by capital expenditure and robust domestic consumption. The real GDP in the first quarter (April–June 2025) grew 7.8 percent, driven by private investment and rising exports.

The following table outlines the changes in the growth outlook compared to previous estimates.
 

The upward trend indicates that India’s economy has continued to grow steadily, despite slower global trade. It also highlights the impact of public infrastructure projects and increased rural spending.

What GDP Growth Forecast Means?

The GDP forecast reflects the expected increase in the country's total economic output over a financial year. It includes growth in sectors such as agriculture, manufacturing, services, and construction. When the RBI raises its GDP forecast, it signals confidence in the country’s production and income capacity.

The RBI report on economic growth and prices also noted that the current account deficit narrowed to 0.6 percent of GDP in the April–June 2025 quarter. This improvement means India’s foreign trade position is more stable than in 2024.

To gain a better understanding, the following table provides a quick overview of India’s external position for FY 2025-26.
 

The stable currency and firm foreign reserves have supported the RBI’s decision to maintain policy rates. This combination of controlled inflation and improved trade balance builds a more substantial base for long-term growth.

India Economic Outlook And Inflation Trends: Prices Under Control

The inflation outlook has improved sharply compared to early 2024. The Consumer Price Index (CPI) is now expected to average 4 percent for FY 2025-26, lower than the 4.5 percent projected in June 2025. The central bank attributes this decline to stable food prices, lower fuel costs, and better monsoon results.

This cooling trend is a relief for households and businesses. It allows more spending and investment without fear of price shocks. The following table presents RBI’s latest quarterly projections.
 

This moderation is consistent with the India economic outlook and inflation trends seen across various reports, including the Ministry of Finance’s Monthly Economic Review (September 2025). The report noted that food inflation remained contained and crude oil prices averaged below USD 80 per barrel during the quarter.

RBI Monetary Policy And Growth Projections: Policy Remains Neutral

The Monetary Policy Committee (MPC) has kept the repo rate unchanged at 6.5 percent for the fifth consecutive meeting. The stance remains “withdrawal of accommodation”, meaning the RBI aims to balance inflation control with growth support.

The decision was unanimous among all six MPC members. The central bank expects the GDP growth momentum to continue, helped by government infrastructure spending and rising private investment.
 

The RBI Governor Shaktikanta Das said that the central bank will closely monitor food prices and global oil trends. If inflation remains stable, rate cuts could be considered in the second half of FY 2026.

Financial markets reacted positively. The Sensex rose 1.2 percent after the announcement, while bond yields remained stable. Analysts see this as a sign that markets trust the RBI’s balanced approach.

Indian Economy GDP And Inflation Forecast: Link With Past Coverage

Earlier, in July 2024, this publication covered India’s Union Budget Review 2024, which emphasised fiscal consolidation and rural development. That budget had projected GDP growth at 6.5 percent for FY 2025-26.

The new RBI projection shows that fiscal and monetary policies are now working together. The manufacturing and services sectors have shown steady expansion since mid-2024 in areas like automobiles, steel, and digital services.

To add perspective, LoansJagat’s article “India’s Trade Turmoil, Growth Targets & The ‘Viksit Bharat’ Dream” discusses how inflation, external sectors, and growth targets interplay in India’s macro outlook. 

This new forecast adds strength to the government’s “Viksit Bharat 2047” goal by suggesting that India can maintain macro stability without policy shocks.

RBI Report On Economic Growth And Prices

India has seen similar growth phases before. During FY 2017-18, GDP growth reached 7.2 percent while inflation stayed near 3.6 percent. However, external shocks such as crude oil spikes disrupted that balance in later years. The RBI appears cautious this time, keeping all assumptions transparent.

The October 2025 Monetary Policy Report clearly states that forecasts are based on a normal monsoon, steady global commodity prices, and continued fiscal discipline. It warns that any rise in oil prices or supply shortages could alter the inflation outlook.

In the past, during FY 2013-14, the central bank had to raise policy rates repeatedly when inflation crossed 9 percent. The current scenario is very different. Inflation is well within the RBI’s 2–6 percent comfort band, and growth remains strong. This indicates that both the government and the central bank have managed to maintain coordination.

Conclusion 

The revised projections bring optimism. They also bring responsibility. Growth can only stay on track if investment, employment, and rural demand keep improving. The RBI has made it clear that it will act if inflation pressures return.

India’s story now stands on stable ground: stronger growth, steady prices, and sound policy. If the next quarters continue this pattern, FY 2025-26 may well mark a turning point for India’s long-term economic confidence.

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