By Bl Mumbai Bureau

Copyright thehindubusinessline

The growth outlook for the second half of FY26 is one of optimism in the backdrop of five-quarter high growth during Q1:2025-26 and high frequency indicators for August showing that manufacturing and services activity at a decadal high, according to RBI’s latest monthly bulletin.

While the imposition of high US import tariff brought in some headwinds to the domestic macro-outlook, the developments since then have underscored the resilience of the economy, said senior RBI officials in an article “State of the Economy”.

The authors noted that S&P sovereign rating upgrade was an acknowledgement of its strong macro-fundamentals.

Further, the Q1:2025-26 GDP estimates reinforced the resilience of domestic growth drivers. Real GDP growth picked up pace reaching a five-quarter high in Q1:2025-26, rising to 7.8 per cent (year on year) from 7.4 per cent (year on year) in the preceding quarter.

Bright spots

High frequency indicators for August show manufacturing and services activity at a decadal high, the authors said. “In this scenario, the growth outlook for H2 is one of optimism. Healthy corporate balance sheets and the focus on structural reforms by the government are the bright spots of the economy. The landmark GST reforms should progressively result in a sustained positive impact through significant gains in ease of doing business, lower retail prices and strengthening of consumption growth drivers,” the officials said.

Moreover, a higher kharif sowing is expected to translate to a sustained growth momentum in the agriculture sector, while also keeping food prices under check. “The transmission of the front-loaded monetary policy easing measures have been robust. Coupled with income-tax relief for households and employment augmenting measures, the stage is set for a sustained pick-up in consumption demand in H2 and potentially for a virtuous cycle of higher investments and stronger growth impulses, overcoming persistent global uncertainties,” opined the officials.

Published on September 24, 2025