The RBI's 6.7% GDP forecast for 2026-27, made on August 5, already looks conservative.
After Monday's blockbuster 7.8% print for April-June, economists have hiked. Ranging from 20 to 80 basis points, the upgrades on Monday and Tuesday now put consensus at 7.2%, up from 6.7% earlier, according to 10 economists. Their forecasts now sit in 6.9-7.5% range.
GDP has been higher than 7% in last three years: 7.3% in 2023-24, 7.2% in 2024-25, and 7.8% in 2025-26. A full-year growth of over 7% in 2026-27 would make it four years in a row.
ANZ economists Dhiraj Nim and Sanjay Mathur said Q1 marked the 12th consecutive quarter of positive surprise relative to market expectations. While RBI had forecast 7%, market was closer to 7.3-7.5%, with only a small number predicting 7.8%. Even those who predicted high have made sharp upward revision to their FY27 forecast.
Soumya Kanti Ghosh, SBI Group Chief Economic Adviser, has raised forecast by 70 bps to 7.3%, having predicted that growth may come in at 8% in April-June. "GDP growth has continued to surprise on the upside," said Upasana Chachra and Bani Gambhir at Morgan Stanley. For them, strength in manufacturing and investment activity "aligns with our view of India being on cusp of a capex up-cycle".
ICICI Securities Primary Dealership's economists led by A Prasanna - who retained forecast of 7% - see risk factors in next three quarters: an unfavourable base effect, crude oil prices, impact on agriculture from sub-par rains, and hit to exports from weaker foreign demand due to tighter financial conditions.
The bigger debate now is what strong growth does to inflation and rates. RBI's own forecast: GDP seen at 6.4% in July-Sept, 6.5% in Oct-Dec, 6.8% in Jan-March 2027, and 7.3% in April-June 2027. Its MPC meets Oct 5-7, where central bank is expected to raise its own prediction.
"The strong GDP data should bolster MPC's confidence on growth, and sharpen its focus on inflation," said Nomura's Sonal Varma and Aurodeep Nandi.
Data earlier this month showed headline retail inflation inched to 4.45% in July from 4.38% in June - the second month in a row above RBI's medium-term target of 4%. RBI also flagged interest rate hikes, as signalled by central bank officials in minutes of Monetary Policy Committee's August 3-5 meeting.
"Fiscal policy choices will also be crucial. In case government chooses to stick to fiscal deficit target, and given front loading on capex growth front, there could be marginal headwind to demand from that side," they added.
The key question, as Nomura frames it, is whether stronger growth will lead to more demand-side inflationary pressures - which have been absent thus far, despite surge in input costs. For now, India has growth with tame inflation. The Q1 surprise suggests that equilibrium may be tested.