Global financial services firm UBS has raised its forecast for India’s real gross domestic product (GDP) growth in FY26 to 6.4 per cent, up from its earlier estimate of 6 per cent, following signs of resilient economic momentum and a stronger-than-expected performance in the March 2025 quarter.
UBS’s India Composite Economic Indicator (CEI) showed economic momentum held up in April, with the seasonally adjusted index rising 1.1 per cent month-on-month, close to its March quarter average, suggesting stable economic activity.
Demand, easing trade tensions, lower oil prices drive UBS GDP revision
Chief India Economist at UBS Securities Tanvee Gupta Jain noted that the revision reflects several factors including robust domestic demand indicators, prospects of easing global trade tensions, and the continued support from lower crude oil prices.
The updated forecast is based on the expectation that household spending will recover, especially in rural areas, guided by a good monsoon and lower food prices. Urban demand is also likely to improve with possible government support like tax cuts and lower inflation.
The outlook also assumes global trade tensions will not escalate and oil prices will stay low, with UBS expecting an average of $65 per barrel in FY26. However, there are still risks to investment growth. UBS sees capital spending slowing due to global uncertainty, budget limits in some states, and strong growth last year in housing.
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India’s real GDP grew by 7.4 per cent in Q4
The revision comes after official data released by the National Statistical Office last week showed that India’s real GDP grew by 7.4 per cent year-on-year in the January–March 2025 quarter, marking the highest growth rate in a year. For FY25 as a whole, real GDP grew by 6.5 per cent, slightly below the Reserve Bank of India’s projection of 6.6 per cent. Nominal GDP for the year rose by 9.8 per cent to ？330.68 trillion.
Growth in the March quarter was led by a sharp contraction in imports, which boosted net exports, as well as a recovery in fixed capital formation. Private consumption growth moderated, while government spending declined. On a gross value added (GVA) basis, the economy expanded by 6.8 per cent in the March quarter, supported by improvements in construction, manufacturing, and services.
UBS expects 50-75 bps rate cut from RBI MPC
On the monetary policy front, UBS expects the Reserve Bank of India (RBI) to reduce rates by a further 50–75 basis points this year, potentially bringing the repo rate down to 5.5 per cent. The RBI's Monetary Policy Committee (MPC) meet is scheduled for Friday, June 6.
"India's macro stability risks remain relatively contained. With the global backdrop remaining uncertain, we expect monetary policy to continue to do the heavy lifting to support India's growth momentum," the UBS report said.
The report also anticipates continued focus on capital spending by the central government and a supportive external environment for services exports, even as goods exports face headwinds from weak global trade.
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