SBI research: Strong consumer spending fuels India's economic growth forecast for Q1 FY26

New Delhi: India’s GDP is expected to expand between 6.8 per cent and 7 per cent in the first quarter of the current fiscal year (Q1 FY26), driven by stronger discretionary spending and demand-led growth, according to a report released on Thursday.

Gross value added (GVA) growth for the quarter is estimated at 6.5 per cent, SBI Research said, noting that the gap between real and nominal growth is likely to narrow significantly in Q1 FY26.

The report highlighted that the peak elasticity of government capital expenditure to GDP has reached 1.17, underscoring the need for private investment to complement public spending in order to sustain long-term growth.

“A major source of concern for sustainable growth is muted private capex. We believe numbers may decline further as US tariffs could significantly impact investments. Private capital must support public expenditure to place the economy on a stronger, sustainable growth trajectory,” the SBI Research report stated.

The global economy remains stable, but activity trends suggest distortions caused by tariffs rather than underlying strength, the report added.

The International Monetary Fund (IMF) recently raised its global growth forecast to 3 per cent for 2025 and 3.1 per cent for 2026, largely reflecting front-loaded activity ahead of tariff implementation. India’s growth projection was revised upwards by 20 basis points to 6.4 per cent, while China’s was lifted by 80 basis points to 4.8 per cent.

During the quarter, Indian corporates, about 4,300 listed entities, posted 4.7 per cent revenue growth and 6.7 per cent EBITDA growth, compared with 11 per cent EBITDA growth in the previous quarter.

SBI Research warned that the resumption of tariffs on Indian exports could weigh on corporate earnings in the next two quarters. However, it added that GST 2.0 could provide a boost to consumption-led sectors and help offset some of the impact.

IANS inputs