India's 'Goldilocks' Momentum: RBI Projects Robust 7.4% GDP Growth for FY26

Market snapshot: On February 6, 2026, the Reserve Bank of India (RBI) underscored India's economic resilience by projecting a real GDP growth of 7.4% for the fiscal year 2025-26. This announcement, delivered by Governor Sanjay Malhotra, follows a series of proactive monetary policy adjustments throughout 2025. The projection reflects a 'Goldilocks' period for the Indian economy—characterized by solid domestic demand, benign inflation, and a supportive global trade environment following the recent India-US trade deal. Markets reacted with cautious optimism as the central bank maintained its 'Neutral' stance, choosing to pause its rate-cutting cycle to assess the impact of previous easing measures.

Summary: RBI projects India's FY26 GDP growth at 7.4%, supported by a low 2.0% inflation forecast and a stable 5.25% repo rate, signaling a strong domestic consumption-led recovery.

Key Takeaways

• GDP Growth Target: Real GDP for FY26 is pegged at 7.4%, driven by strong agricultural performance and GST rationalization.
• Monetary Policy Stance: Repo rate held steady at 5.25% after a cumulative 125 bps reduction since February 2025.
• Inflation Control: CPI inflation forecast for FY26 has been lowered to 2.0%, reflecting improved supply-side management.
• External Catalysts: Recent India-US trade agreements and a reduction in tariffs to 18% have significantly improved export competitiveness.

SAHI Perspective

The RBI's projection of 7.4% is a clear signal that the domestic economy is decoupled from the sluggish growth seen in other major economies. By holding rates at 5.25%, the central bank is prioritizing the stabilization of bond yields and ensuring the transmission of previous rate cuts. Investors should look at this as a period of consolidation. The focus on liquidity management over further rate cuts suggests that the RBI is building a buffer against potential external shocks while allowing the government's ₹12.2 lakh crore capex push to filter through the infrastructure and real estate sectors.

Closing Insight

As India positions itself to become the world's fourth-largest economy by the end of 2026, the RBI's balanced approach provides the necessary stability for long-term equity market performance.

High Performance Trading with SAHI.