UBS upgrades India’s GDP outlook; will low oil prices and upcoming RBI MPC power FY26 growth?

Global investment bank UBS has upgraded its India FY26 GDP growth forecast to 6.4 per cent, from 6 per cent previously. This follows a strong 7.4 per cent real GDP growth in Q4 FY25, solid domestic demand, calming global trade tensions, and easing crude oil prices.

This new outlook shows that economic momentum is maintaining itself, even as global growth slows and domestic capital expenditure is limited somewhat.

Strong Q4 GDP Data 

India’s economy grew faster than expected in the January – March 2025 quarter. According to the National Statistical Office (NSO) data, real GDP grew 7.4 per cent YoY, the fastest in a year. GVA for the quarter also grew 6.8 per cent, driven by a strong rebound in manufacturing, construction, and services.

UBS cited this outperformance as a key reason to upgrade their GDP outlook for FY26, as well as improving trends in fixed capital formation and net exports.

What’s fuelling the food prices?

UBS Chief India Economist Tanvee Gupta Jain stated that the upgrade in the forecast is based on expectations of a recovery in rural demand, helped by a favourable monsoon and easing food inflation.

The multinational investment bank also noted that urban consumption could strengthen further in FY26 with government policy tools to cushion this demand, such as tax relief and inflation suppression.

Global trade tensions 

UBS also focuses on the global trade aspect, stating that disruptions do not escalate, and projects crude oil prices to be around $65 per barrel in FY26, which is a huge tailwind for India’s likely import bill and inflation outlook.

UBS also noted downside risks to the potentially rosy outlook, including capex likely slowing after a strong FY25, especially around states and housing.

RBI rate cut expected

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is also expected to cut the 25 basis points (bps) of the repo rate in its next meeting, set between June 4 and 6. This will be the third successive repo rate cut since February 2025, lowering the policy rate to 5.75 per cent. It is expected that the policy cues will be watched closely on June 6. 

India’s economy, with macro stability, falling inflation and global conditions being supportive, is poised for steady stable growth into FY26, according to UBS.