RBI MPC Meeting GDP Forecast: India’s central bank retains growth forecast at 6.5%

The Reserve Bank of India’s rate-setting Monetary Policy Committee on Friday retained India’s GDP forecast for FY2025-26 at 6.5% amid economic uncertainty, triggered by shifting trade dynamics around US President Donald Trump’s sweeping tariffs.The Malhotra-led panel also slashed interest rates for the third straight to boost economic growth. The Sanjay Malhotra-led panel reduced interest rates by 50 basis points to 5.75%.India’s economic growth in Q4 accelerated to 7.4 per cent, but it couldn't save the economy from posting its slowest growth since Covid-era in FY25.India’s GDP rose to a four-quarter high of 7.4% in the three months to March from a year earlier, as per data released by the government last week. For the fiscal year ended March, the economy expanded 6.5%.While India retained its title as the world’s fastest-growing major economy, the annual growth rate marked a notable slowdown from the 8% average seen in recent years — the pace needed by Prime Minister Narendra Modi to achieve the goal of making the country a developed nation by 2047.India-US trade deal coming soonMeanwhile, India and U.S. are holding high-level talks this week, aiming to finalise tariff cuts in sectors such as farm and automobiles as part of an interim deal, two government sources told Reuters, with an announcement likely later this month.India and the U.S. agreed in February to work on a phased deal, aiming to lift bilateral trade to $500 billion by 2030.Officials said, India, buoyed by recent trade pact with the UK, and EU talks, is resisting U.S. demands to open its farm and dairy markets, citing potential rural backlash.Washington has flagged India's average farm tariff of 39%, with some duties reaching 45-50%. It is also pushing India to allow corn imports for ethanol production.The US remained India's largest trading partner for the fourth consecutive year in 2024-25, with bilateral trade valued at USD 131.84 billion. The US accounts for about 18 per cent of India's total goods exports, 6.22 per cent in imports, and 10.73 per cent in the country's total merchandise trade.With America, India had a trade surplus (the difference between imports and exports) of USD 41.18 billion in goods in 2024-25. It was USD 35.32 billion in 2023-24, USD 27.7 billion in 2022-23, USD 32.85 billion in 2021-22 and USD 22.73 billion in 2020-21.Despite the external challenges, the Indian economy remains relatively healthy due to its limited reliance on global goods trade, recent tax cuts, controlled inflation and a potentially softer interest rate environment.“While external uncertainties—such as supply chain disruptions and energy market volatility—pose challenges, India continues to benefit from strong service sector performance, a stable banking system, and improving manufacturing output under schemes like PLI,” said Dr. Manoranjan Sharma, Chief Economist at Infomerics Valuations and Ratings Ltd.India to become 4th largest economyIndia is set to become the world’s fourth-largest economy by the end of 2025 (FY 2025-26), according to the International Monetary Fund’s (IMF) World Economic Outlook (WEO) report released in April.A few years ago, India overtook the United Kingdom to become the fifth largest, and is now well on its way to rise to the fourth spot in the list of the top 10 largest economies in the world by overtaking Japan.In just 11 years, India has surged from the world’s 10th to the 4th largest economy — a remarkable trajectory driven by sustained growth and strategic reforms under the NDA government.India’s nominal GDP has more than doubled from 2014 to 2025 (projected). It’s a growth of 105% in just a decade. In 2025, India will also become a $4 trillion economy.