India’s GDP Growth: 7.7% in FY26
India’s GDP grew by 7.7% in FY26 while the RBI lowered its FY27 growth forecast to 6.6% and raised inflation projections. Learn about GDP, GVA, repo rate, and MPC for UPSC.
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.
India’s GDP Growth Prelims Facts
- GDP is the principal indicator used to measure the size and growth of an economy.
- Real GVA excludes taxes and subsidies.
- Repo Rate is the rate at which the RBI lends short-term funds to commercial banks.
- The MPC consists of 6 members.
- RBI follows a flexible inflation-targeting framework.
- A neutral stance indicates that the RBI is not signalling either policy tightening or easing.
