India's Finance Ministry Maintains FY27 GDP, Inflation Projections Despite Ongoing Tensions with Iran

Finance Ministry to Rely on RBI's GDP and Inflation Projections for FY2026–27

The Finance Ministry has announced that it will refrain from issuing separate GDP growth and inflation projections for FY2026–27, opting instead to work with the Reserve Bank of India's (RBI) estimates. This decision was made by Chief Economic Adviser (CEA) V. Anantha Nageswaran, who expressed confidence in the central bank's assessment despite global oil and weather-related risks affecting the outlook.

Speaking at a press conference on June 5, following the release of provisional annual Gross Domestic Product (GDP) estimates and fourth-quarter (Q4) GDP data for FY2025–26, Nageswaran stated that the RBI's assessment of growth and inflation for FY2026–27 appeared to be "fair estimates" and did not require further analysis. The RBI had previously lowered its real GDP growth forecast for FY2026–27 to 6.6 percent from 6.9 percent, citing risks from elevated crude oil prices, supply disruptions, and weaker monsoon prospects.

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The RBI also raised its Consumer Price Index (CPI)-based inflation projection for FY2026–27 to 5.1 percent from 4.6 percent, reflecting concerns over food prices and imported inflation risks from higher energy costs.

India's real GDP growth accelerated to 7.7 percent in FY2025–26 from 7.1 percent in FY2024–25, providing a "strong starting point" for the economy despite emerging external risks. The CEA described this growth as a positive development, indicating that the economy is well-positioned to withstand potential external shocks.

Nageswaran also highlighted the potential for India's growth trajectory to return to above 7 percent in FY28, even if economic expansion moderates below that level in FY27. This optimism is based on macroeconomic stability measures, supply-side interventions, and expected gains from trade agreements.

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The CEA pointed to improving policy certainty through trade agreements, stating that India could begin seeing gains from recently negotiated pacts during the current financial year. The UK and EU trade agreements, in particular, are expected to improve market access and support exports and investment.