India’s Q2-FY26 growth surprised on the upside, with real GDP expanding by 8.2% YoY, partly supported by a favourable base effect and low deflators. Growth momentum is, however, expected to ease in H2 as base effects fade and government spending moderates, with growth increasingly driven by private consumption and a gradual recovery in private investment. External trade continues to face headwinds from US tariffs, with the US–India trade deal still elusive. Reflecting the stronger-than-expected Q2-FY26 outturn, we revise our FY26 real GDP growth forecast upward to 7.4% from 6.8%. Amidst the sharp moderation in inflation, the RBI cut the repo rate by 25-bps to 5.25% in the December policy meeting, complemented by liquidity infusion measures to support the policy transmission. Going forward, we expect the RBI to focus on effective policy transmission and do not anticipate any additional rate cut in FY26 unless the growth outlook deteriorates meaningfully.