RBI lowers GDP growth forecast for FY27 to 6.6%
What's the story
The Reserve Bank of India (RBI) has revised its GDP growth forecast for the fiscal year 2026-27 (FY27) from 6.9% to 6.6%. RBI Governor Sanjay Malhotra announced the change during the central bank's monetary policy committee meeting on Friday. The revision comes in light of the ongoing crisis in the Middle East, rising crude oil prices, and potential disruptions due to a subpar southwest monsoon season.
Monetary policy
Repo rate unchanged at 5.25%
The RBI has also maintained its repo rate at 5.25%. The central bank's decision comes as it continues to adopt a 'neutral' stance in light of changing economic conditions. The MPC had previously projected India's real GDP growth for FY27 at 6.9%, with quarterly estimates ranging from 6.8% to an optimistic forecast of up to 7.2% in Q4.
Inflation forecast
Inflation projection raised to 5.1%
The RBI has also raised its inflation projection for FY27 from 4.6% to 5.1%. Governor Malhotra said that while underlying inflation pressures remain benign at this juncture, generalization of inflation through second-round effects on expectations and wages is a distinct possibility. He cautioned that "the outlook also remains clouded by the subnormal south-west monsoon forecast and El Nino risks."