RBI Raises FY26 GDP Growth Forecast to 7.6%, Expects Slower Expansion in FY27

Reserve Bank of India Projects 6.9 Percent Growth for FY27 Amid Emerging Risks

The Reserve Bank of India (RBI) has estimated India's real GDP growth for the previous year at 7.6 percent under a new GDP series, Governor Sanjay Malhotra said, even as the central bank flagged emerging risks from global geopolitical disruptions.

For FY27, however, the central bank has projected growth at 6.9 percent, indicating a moderation as external risks and cost pressures begin to build. The RBI has also revised its near-term outlook, with Q1FY27 GDP growth cut to 6.8 percent from 6.9 percent earlier, while Q2FY27 growth has been lowered more sharply to 6.7 percent from 7 percent.

India's macroeconomic fundamentals had "exuded confidence" before the escalation of the West Asia conflict, with growth supported by strong domestic demand. However, Malhotra noted that "geopolitical conditions turned adverse in March" with the widening and intensification of the conflict, adding that disruptions in the Strait of Hormuz could affect growth this year.

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The Monetary Policy Committee (MPC) said the intensity and duration of the conflict, along with potential damage to energy and other infrastructure, pose risks to both growth and inflation outlooks. While headline inflation remains below the target, the RBI flagged increasing upside risks from higher energy prices and possible weather-related disruptions affecting food prices.

A sharp rise in global energy prices and shortages of key inputs have "stoked inflation fears" and pushed up geopolitical risk premia in oil markets. Core inflation pressures, however, remain muted. Elevated crude prices could also lead to higher imported inflation and widen the current account deficit.

The RBI said global growth faces increasing downside risks, with higher energy costs and supply constraints weighing on economic activity. Financial markets have turned volatile, and sovereign bond yields have hardened across countries amid inflation concerns. The central bank also warned that weaker global growth prospects could dampen external demand and reduce remittance flows.

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The MPC kept the policy repo rate unchanged at 5.25 percent and retained a neutral stance, while reiterating that it will remain flexible and respond to incoming data. Malhotra said the government has taken steps to ensure the supply of critical inputs across sectors to mitigate the impact of supply chain disruptions.