New Delhi: The Reserve Bank of India (RBI) on Wednesday retained its GDP growth forecast for the current financial year (FY 2025-26) at 6.5%, while lowering its inflation projection to 3.1% from the earlier 3.7%, citing declining food prices, stable macroeconomic conditions, and supportive policy frameworks.
The announcement came during the unveiling of the third bi-monthly monetary policy for FY26 by RBI Governor Sanjay Malhotra, who noted that domestic growth remains robust despite emerging risks on the global front.
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Growth Outlook: Stable but Cautious Optimism
Governor Malhotra affirmed that domestic economic activity is supported by several key factors including:
- Above-normal monsoon
- Rising capacity utilisation
- Congenial financial conditions
- Robust government capital expenditure
He highlighted continued buoyancy in the services sector, particularly in construction and trade, while noting some mixed signals in May-June from high-frequency indicators. While rural consumption remains strong, the urban discretionary spending still appears tepid.
“Growth is robust and as per projections, though it is below our aspirations,” Malhotra said, while pointing to the impact of the 100 basis points rate cut since February 2025, which he said is still unfolding.
Global Headwinds Remain a Concern
Despite the strong domestic fundamentals, the RBI governor flagged prolonged geopolitical tensions, global market volatility, and trade uncertainties as risks to the outlook.
“The uncertainties of tariffs are still evolving. Headwinds from global uncertainties remain a significant risk to the Indian economy,” he said.
The real GDP growth forecast for FY26 remains at 6.5%, with quarterly projections as follows:
- Q1 FY26: 6.5%
- Q2 FY26: 6.7%
- Q3 FY26: 6.6%
- Q4 FY26: 6.3%
For Q1 FY27, GDP is projected to grow by 6.6%, with risks evenly balanced.
Inflation Outlook: CPI at Multi-Year Low
On the inflation front, the RBI revised its outlook sharply downward to 3.1%, citing a significant drop in food inflation and an overall benign price environment.
- June CPI: 2.1% — the lowest in 77 months
- FY26 CPI Forecast: 3.1%
- Q2: 2.1%
- Q3: 3.1%
- Q4: 4.4%
- Q1 FY27 CPI Projection: 4.9%
“The inflation outlook has turned more benign than anticipated. However, risks remain contingent on volatile food and global energy prices,” the Governor cautioned.
Broader Policy Reforms Needed
Governor Malhotra emphasized that monetary policy alone cannot shoulder the entire burden of economic transformation. He called for stronger frameworks across regulatory, fiscal, and governance domains.
“As the Indian economy strives to attain its rightful place in the global order, stronger policy frameworks across all domains will be pivotal,” he said.
