Indian economy likely grew 6.8-7% in Q1 FY26, higher than RBI's estimate: SBI report

New Delhi [India], August 21 (ANI): The Indian economy may have registered a strong growth rate of around 6.8 per cent to 7 per cent in the first quarter of the current financial year, significantly higher than the Reserve Bank of India's estimate of 6.5 per cent, according to a report by the State Bank of India (SBI).

The report noted that its analysis results show GDP growth at 6.9 per cent during the quarter, with Gross Value Added (GVA) estimated at 6.5 per cent. Based on this model, SBI obtained a nowcast of real GDP growth at 6.9 per cent year-on-year for the reference quarter.

It stated "Initial estimates showcase Q1 FY26 GDP could be at approx. 6.8 per cent-7.0 per cent."

The report highlighted that this the forecast is statistically consistent with the trajectory observed in previous quarters, with factor dynamics providing persistence and smooth adjustment. This anchors the current projection within the medium-run growth path suggested by the model.

However, for the full financial year FY26, the report projected GDP growth at 6.3 per cent, which is lower than the RBI's full-year target of 6.5 per cent. SBI noted that it has reduced the RBI's projection for GDP growth by 0.2 percentage points for the second to the fourth quarter of FY26.

The report also discussed the narrowing gap between real and nominal GDP growth. In Q1 FY23, the gap was as large as 12 percentage points, but it fell sharply to 3.4 percentage points in Q4 FY25.

For Q1 FY26, the report suggested that this gap will narrow further, as inflation remains historically low. With the GDP deflator expected to reduce, the difference between real and nominal GDP growth is likely to shrink.

According to SBI, this narrowing of the gap could mask the current deceleration in growth momentum. As a result, nominal GDP could drop to 8 per cent in Q1 FY26, even though real GDP growth remains robust in the range of 6.8 per cent-7.0 per cent. (ANI)

(This content is sourced from a syndicated feed and is published as received. The Tribune assumes no responsibility or liability for its accuracy, completeness, or content.)