India’s Q1 FY26 GDP Growth Likely at 6.8–7% Driven by Strong Consumer Demand: SBI Research
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New Delhi, Aug 21 (TTP): India’s economy is expected to post a robust 6.8–7% GDP growth in the first quarter of FY26 (April–June 2025), buoyed by higher discretionary spending and demand-led growth, according to the latest SBI Research report.
The report also estimated Gross Value Added (GVA) growth at 6.5% for the quarter, while noting that the gap between real and nominal growth is set to narrow significantly in Q1 FY26.
Consumer Spending Powers Growth
The key driver behind this quarter’s strong numbers is higher discretionary spending, particularly in urban markets, supported by rising incomes and improving consumer confidence.
According to SBI Research, consumption has emerged as the primary engine of growth in the economy, even as private investment continues to remain subdued.
Concerns Over Weak Private Investment
While government-led capital expenditure continues to play a strong role, SBI Research cautioned that muted private capex remains a concern for sustainable long-term growth.
The report highlighted that the elasticity of government capital expenditure to GDP has peaked at 1.17, underlining the need for private investment to complement public spending.
It further warned that US tariffs on Indian exports could weigh on corporate earnings and drag down private investment in the coming quarters.
“A major source of concern for sustainable growth is the muted private capex. We believe numbers may further decline as US tariffs may significantly impact the capex. Private investment must complement public investment to take the economy onto an even higher sustainable growth path,” the report noted.
Global Economic Outlook
The global economy remains steady, but the SBI report pointed out that much of the growth reflects distortions caused by tariffs, rather than genuine underlying robustness.
The International Monetary Fund (IMF) recently revised its global growth projections upwards to 3% in 2025 and 3.1% in 2026, largely due to front-loading ahead of tariff materialisation.
For India, the IMF raised its forecast by 20 basis points to 6.4%, while China’s growth outlook was raised by 80 basis points to 4.8%.
Corporate Performance in Q1
During Q1 FY26, Indian corporates reported mixed results:
- Around 4,300 listed companies posted 4.7% revenue growth.
- EBIDTA growth stood at 6.7%, down from 11% in the previous quarter.
SBI Research observed that the resumption of tariffs on Indian exports is likely to create a negative earnings outlook for the next two quarters.
GST 2.0 Could Offset Tariff Impact
The report suggested that GST 2.0 reforms, if implemented effectively, could give a significant push to consumption-led sectors and offset the adverse effects of tariffs on corporate earnings.
By streamlining tax structures and enhancing compliance efficiency, GST 2.0 has the potential to strengthen domestic demand, thereby supporting India’s growth momentum.
Why This Matters
- Short-Term Growth Momentum: India’s economy remains resilient despite global headwinds.
- Private Capex Challenge: Without stronger private investment, sustaining growth above 7% could prove difficult.
- Tariff Risk: US trade policies remain a major external risk factor.
- Policy Opportunity: GST 2.0 could be a gamechanger for consumption-driven growth.
Final Thoughts from TheTrendingPeople.com
India’s strong Q1 FY26 growth projection highlights the resilience of consumer demand even as global trade headwinds loom large. However, the sustainability of this growth depends on reviving private investment, reducing reliance on government capex, and ensuring reforms like GST 2.0 are implemented swiftly to maintain momentum.