Investment Boom Set to Outpace Consumption in India's FY26 Economic Landscape

A report from SBI Mutual Fund forecasts that investments in India will surpass consumption for the financial year 2025-26. Economic growth is expected to gradually improve, backed by government and RBI policy measures, with an estimated GDP growth rate of 6.5-7% in FY26.

In the financial year 2025-26 (FY26), investments in India are projected to outshine consumption, as indicated in a recent report by SBI Mutual Fund. The report underscores a gradual improvement in economic growth in the latter half of FY25, buoyed by strategic measures from the government and the Reserve Bank of India (RBI).

The findings suggest that investment will emerge as a standout performer over consumption in FY26. A recovery has been noted in India's GDP, which grew by 6.2% in the third quarter of FY25, up from a revised 5.6% in the previous quarter.

The report anticipates India's growth to settle between 6.5-7% in FY26, a slight dip from the 7.5-9% observed between FY22 and FY24, yet still robust as an economic extent. Alongside increased investments, factors such as rural consumption improvements and ramped-up government spending are expected to bolster GDP growth in the upcoming quarters.

Recent government and RBI movements reveal a shift towards economic expansion, with the central bank reducing interest rates, boosting liquidity, and loosening credit regulations. Fiscal policy continues to focus on consolidation with expectations of hitting spending goals compared to FY25, fostering growth potential.

While government capital expenditure may not significantly increase, strong corporate order books signal a steady private investment pace. The report also posits that nominal GDP growth might inch up to 10-11% in FY26, compared to 9-10% in FY25, with investments spearheading the economic momentum, overtaking consumption as the primary growth driver.

(With inputs from agencies.)