India’s Q2 GDP Growth Pegged At 7.5%, SBI Flags Missed Rate Cut Opportunity For RBI

India’s economy is expected to expand by 7.5% in the second quarter of FY26, according to a nowcast model by the State Bank of India (SBI). The report attributes this robust growth to a surge in consumption during the festive season, improved rural demand, and structural reforms such as GST rate rationalization. This projection exceeds the Reserve Bank of India’s earlier estimate of 7%, signaling stronger-than-anticipated momentum.

However, the SBI report also raises concerns that the RBI may have missed a strategic opportunity to initiate a rate cut, especially with inflation consistently below the 4% threshold. The upcoming monetary policy meeting in December is now viewed as a critical juncture for recalibrating the central bank’s stance.

Key highlights from the report include:  

• SBI’s nowcast model estimates Q2 GDP growth at 7.5%, supported by 83% of leading indicators showing acceleration, up from 70% in Q1.
• GST rationalization played a pivotal role in boosting consumption, particularly during the festive sales period.
• Investment activity and manufacturing sector performance contributed significantly to the growth trajectory.
• Rural consumption showed signs of recovery, aided by improved agricultural output and targeted welfare schemes.
• The RBI’s cautious approach to rate cuts is under scrutiny, with inflation remaining well within the comfort zone.
• Experts suggest that delaying rate cuts could dampen credit growth and slow down private investment momentum.
• The SBI report emphasizes that the current macroeconomic environment presents a rare alignment of low inflation and high growth, ideal for monetary easing.
• The December policy meeting is expected to be closely watched for signals on interest rate direction and liquidity management.

Sources: SBI Research Report, The Hindu BusinessLine, Republic World, Swarajya Magazine, Mint.