Investments likely to outperform Consumption in FY26: SBI MF Report

The report also highlighted that economic growth is likely to improve gradually in the second half of FY25, supported by policy measures from the government and the Reserve Bank of India (RBI).

It said "Between consumption and investment, investment could be a likely out-performer in FY26".

India's gross domestic product (GDP) grew by 6.2 per cent in the third quarter (Q3) of FY25, marking a recovery from the revised figure of 5.6 per cent in the previous quarter.

The report estimated that India's growth is likely to be in the range of 6.5-7 per cent in FY26, compared to an expected 6.5 per cent in FY25.

While this growth rate is lower than the 7.5-9 per cent recorded during FY22-FY24, it is still considered a healthy level of expansion for the economy.

Other than increased investments the report highlighted several other factors as well that could support GDP growth in the coming quarters. Rural consumption is expected to improve, along with higher government spending, which could provide a slight boost to overall economic activity.

The report mentioned that in the last two years, focus of the government's fiscal policy was consolidation, while the RBI had prioritized controlling inflation and ensuring financial stability. But now there is a shift toward supporting economic growth.

The RBI has initiated interest rate cuts, taken steps to improve liquidity, and relaxed certain credit-related regulations.

Meanwhile, on the fiscal front, the government is maintaining its consolidation efforts but is expected to better meet its spending targets compared to FY25, which could contribute positively to growth.

Although government capital expenditure (capex) may not increase significantly, corporate order books remain strong, indicating a stable private investment pipeline. The report also suggests that nominal GDP growth could pick up slightly to 10-11 per cent in FY26, compared to 9-10 per cent in FY25.

With both monetary and fiscal policies now focusing more on economic expansion, investment is likely to be the key driver of growth in FY26, surpassing consumption as the primary contributor. (ANI)