Key facts
- RBI has raised its GDP growth forecast for FY26 to 7.4%.
- Quarterly GDP growth for FY27 is projected at 6.9% and 7% for Q1 and Q2.
- The central bank expects headline CPI inflation to be 2.1% for FY26, rising to 3.2% in Q4.
- The policy repo rate was held steady at 5.25%.
- The RBI views India's economy as being in a 'Goldilocks' zone with strong growth and controlled inflation.
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has revised its Gross Domestic Product (GDP) growth projection for FY26 to 7.4%, with Governor Sanjay Malhotra noting the economy's steady and improving trajectory. Quarterly projections for FY27 were also adjusted upward to 6.9% and 7% for the first and second quarters, respectively.
Real GVA is estimated at 7.3%, supported by resilient domestic demand and improving investment momentum. The central bank anticipates that economic activity will remain robust in the coming year.
On the inflation front, the RBI projects headline Consumer Price Index (CPI) inflation at 2.1% for FY26, with an expected rise to 3.2% in the fourth quarter, attributed to firmer price pressures, particularly from precious metals.
The MPC decided to maintain the policy repo rate at 5.25%, continuing its pause on interest rates. This decision was widely anticipated, with analysts suggesting a rate reduction could impact capital flows and the rupee. The neutral stance indicates a wait-and-watch approach by the RBI.
Experts noted that the upward revision in GDP numbers is positive, and the final trajectory will become clearer once new GDP and CPI data are released. The Union Budget and anticipated trade deals with the US and EU are expected to further bolster growth prospects. The RBI continues to describe India's economy as being in a 'Goldilocks' zone, characterized by strong growth and controlled inflation.