India’s economy is set for a rebound in the first half of FY26, with GDP growth projected at 7.4%, UBS Global Research said. However, full-year growth may moderate to 6.8% due to weaker exports, US tariffs, and base effects. The report expects inflation to drop to a historic low and sees space for another rate cut by the RBI.

BulletsIn

•  H1FY26 GDP growth estimated at 7.4%, up from 5.8% last year
•  Full-year FY26 GDP seen at 6.8%, softening to 6.3% in H2FY26
•  Slower growth due to weak exports, higher US tariffs, and base effects
•  Nominal GDP growth may fall to 8.5%, lowest since FY20 (excluding pandemic)
•  Domestic demand, tax adjustments, and higher capital spending driving recovery
•  Rural consumption rising on low inflation, good monsoon, and women-focused welfare
•  Urban demand aided by GST cuts, income tax relief, and easier credit
•  Inflation forecast at 2.4% for FY26, lowest in over a decade
•  Lower food inflation, neutral ENSO, and low energy prices supporting trend
•  UBS expects one more 25 bps RBI rate cut to bring repo rate near 5.0–5.25%