BofA Global Research has decided to keep India’s GDP growth forecast for FY26 at 7.6 percent while increasing the forecast for FY27 from 6.8 percent to 7.4 percent. This adjustment reflects a more favorable trade environment and relatively lenient fiscal and monetary policies. The revision indicates reduced risks to growth and enhanced resilience in both private consumption and investment.
The research firm mentioned that despite rising commodity prices, there is still room for accommodative monetary policies. It highlighted that the updated GDP figures will be crucial for the Reserve Bank of India (RBI) to shape future policies. The strength of the revised data, combined with stabilizing inflation, is expected to lead the RBI to maintain interest rates at current levels while ensuring sufficient credit flow.
Following the release of new Consumer Price Index (CPI) and GDP data, the focus now shifts to the RBI’s evaluation of growth and inflation in the upcoming April Policy and monetary policy report. The sector-wise breakdown in the new GDP series reveals a notable shift, with the secondary sector maintaining a significant share of GDP at 26 percent, while the primary sector has seen slight gains at the expense of services.
Within the Gross Value Added (GVA), the secondary sector has consistently exhibited higher growth rates, outpacing the tertiary sector. The data also indicates a marginal decrease in the investment share in real terms, along with a modest decline in the share of private consumption. The report attributes discrepancies to the absence of informal sector data, emphasizing the need for regular surveys.
The new GDP calculations incorporate data from various sources such as enhanced GST filings, e-Vahan data, and payment transactions. Methodological changes in constant price estimates, including the use of a double deflator method for manufacturing, have contributed to substantial revisions. The report also mentions the adoption of a volume/single extrapolation method in place of single deflation previously used.
