SBI estimates the GDP growth for FY26 to be 6.3%, in its recent report citing global uncertainty.
The latest SBI report on India's GDP growth during the fiscal year 2025-26 takes a cautiously optimistic view in the face of global economic uncertainties. SBI Research projects India's economy to grow at 6.3% in FY26, just under the Reserve Bank of India's (RBI) estimate of 6.5%. The report highlights the economic momentum witnessed in the first quarter of the fiscal year, with GDP growth estimated between 6.8% and 7%, even surpassing the RBI’s Q1 estimate of 6.5%.
This robust start to the fiscal year is attributed largely to steady macroeconomic fundamentals and the resilience of public capital expenditure, despite muted private investment activity. The report highlights muted private capital spending as a major risk driver that will dampen sustained growth over the next few quarters. A survey of more than 2,000 companies in agriculture, manufacturing, and IT industries showed weaker capital spending plans for FY26 compared to last year. This conservative approach by companies is partly due to the effect of continuing U.S. tariffs and international trade tensions, potentially limiting private sector growth.
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SBI’s report also details quarterly projections where GDP growth is expected to moderate gradually forecasting 6.5% in Q2, 6.3% in Q3, and slipping further to 6.1% in Q4. These lower quarters reflect the anticipated challenges in maintaining the strong economic momentum of the opening quarter.
In spite of these issues, public expenditure remains structurally important and complementary to Indian economic growth. The continued spending by the government serves as a buffer against uncertain global circumstances. Further, credit growth in the banking sector witnessed some softening, reaching around 10 percent in mid-2025 from elevated levels in the past year, with sectoral lending except for small and medium enterprises (SMEs) coming down.
The second significant observation from the SBI report is the declining difference between real and nominal GDP growth. Since inflation is low, the gap between the two measures has narrowed significantly, which could mask the perception of decelerating growth momentum. That implies while real GDP growth is relatively good, the nominal GDP may seem less vibrant on account of contained inflationary pressures.
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Overall, the SBI report highlights the mixed economic situation confronting India in FY26. While the economy begins on a strong note, sustaining growth will need policy intervention at a strategic level to counter global headwinds, revive private investment, and optimize public expenditure. The report indicates guarded optimism based on robust fundamentals but kept in check by prudent economic management in the face of external uncertainties.
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This subtle perspective offers worthwhile advice to policymakers, investors, and companies as they look ahead to the second half of the year and beyond, advocating resilience as much as prudence in India's growth path.
