RBI Lowers Growth Outlook, Raises Inflation Forecast as Global Pressures Mount
The Reserve Bank of India (RBI) has revised its economic projections for the current financial year, lowering its GDP growth forecast while raising its inflation estimate amid concerns over rising energy prices and global supply disruptions.
Announcing the Monetary Policy Committee’s decision on Friday, RBI Governor Sanjay Malhotra said the central bank now expects India’s economy to grow by 6.6% in FY2026-27, down from its earlier estimate of 6.9%. At the same time, the inflation forecast has been increased to 5.1% from 4.6%.
Despite strong domestic demand, the RBI noted early signs of slowing momentum in certain sectors. The central bank also warned that elevated crude oil prices and ongoing global supply-chain challenges could weigh on economic activity in the coming months.
Malhotra stated that crude oil prices during FY2026-27 are likely to remain significantly higher than the $85 per barrel assumption used in the RBI’s April projections, creating additional inflationary pressure.
For the four quarters of FY2026-27, the RBI expects GDP growth to be 6.6%, 6.3%, 6.5%, and 6.8%, respectively. These figures are lower than the central bank’s previous estimates announced earlier this year.
Inflation projections have also been revised upward. Consumer Price Index (CPI) inflation is now expected to average 4.2% in the first quarter, 5.1% in the second, 5.9% in the third, and 5.4% in the final quarter of the fiscal year.
The RBI also increased its core inflation forecast to 4.7% from 4.4%, indicating concerns about persistent underlying price pressures beyond food and fuel costs.
Alongside the revised forecasts, the six-member Monetary Policy Committee unanimously decided to keep the repo rate unchanged at 5.25% and continue with its ‘neutral’ policy stance. The move signals a cautious approach as policymakers balance growth concerns against inflation risks.
The revised outlook reflects the RBI’s effort to navigate an increasingly uncertain global environment while ensuring that inflation remains within its target range and economic growth remains on a stable path.
News source: Information for this article was gathered from a variety of reliable news outlets.
