India’s GDP Growth: 7.7% in FY26

Why in News?

India’s economy grew by 7.7% in FY 2025-26, while GDP expanded by 7.8% in the fourth quarter (January-March 2026). On 5 June 2026, the Reserve Bank of India (RBI) revised its FY27 growth forecast downward to 6.6% and raised its inflation forecast to 5.1%.

Key Highlights

India’s Economic Performance

• GDP growth stood at 7.7% in FY26.
• The economy grew by 7.8% in Q4 FY26.
• Real Gross Value Added (GVA) grew by 7.9% during FY26.
• Growth was driven by:
  • Domestic demand
  • Investment activity
  • Manufacturing
  • Construction
  • Services sector

RBI Monetary Policy Decision

• The Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.25%.
• RBI retained a neutral policy stance.
• The FY27 GDP growth forecast was reduced from 6.9% (April 2026) to 6.6% (June 2026).
• Inflation forecast for FY27 was increased to 5.1%.

Reasons for Lower Growth Forecast

The RBI cited several risks:

• West Asia conflict and geopolitical tensions
• Rising energy prices
• Supply-chain disruptions
• Weather-related uncertainties affecting economic activity

Related Institutions and Concepts

Reserve Bank of India (RBI)

• India’s central bank.
• Established in 1935 under the Reserve Bank of India Act, 1934.
• Responsible for monetary policy, inflation management, and financial stability.

Monetary Policy Committee (MPC)

• Constituted under the RBI Act, 1934.
• Consists of six members.
• Decides the policy repo rate to achieve inflation targets.

Gross Domestic Product (GDP)

• Measures the total market value of final goods and services produced within a country during a specific period.
• Widely used to assess economic growth.

Gross Value Added (GVA)

• Measures economic output excluding taxes and subsidies.
• Provides sector-wise assessment of economic activity.