Many perspectives, one conclusion

RBI has increased its estimate of growth for 2025-26 from 6.5% to 6.8%, but it had very little to say on unemployment (RBI Bulletin, September 2025, State of the Economy): “Various indicators of employment conditions depicted a mixed picture in August. The all-India unemployment rate declined to 5.1%...” The scant attention to unemployment is because the RBI Act mandates the RBI to securing monetary and price stability with no reference to employment.The Ministry of Finance, in its August issue of Monthly Economic Review, stayed within the earlier predicted range of 6.3-6.8%. On unemployment, the Review did not express any view.

- P Chidambaram

The World Bank estimated India to grow at 6.5% in 2025-26 but trimmed it to 6.3% in 2026-27. The International Monetary Fund increased its projection of India’s growth rate to 6.6% for 2025 while predicting a decline to 6.2% for 2026. The Organization for Economic Cooperation and Development (OECD) projected India to grow at 6.7% in 2025-26 and 6.2% in 2026-27.

GFCF, the spoiler

The consensus is India’s growth rate will be 6.5% in the current year and lower by 20 basis points in the next year. These estimates broadly confirm Dr Rangarajan’s conclusion. Dr Rangarajan has identified the reasons for the modest growth rate: the gross fixed capital formation (GFCF) rate that has been stationary for the last few years and the causes for the stationary GFCF rate. GFCF has fallen from 35.8% of GDP in 2007-08 to 30.1% of GDP in 2024-25. It has been more or less stationary in the last 10 years at between 28 and 30%.