Reserve Bank of India raises FY27 GDP forecast to 7.1 per cent

RBI forecasts India`s GDP at 7.1 per cent in FY27. RBI file pic

The Reserve Bank of India (RBI) on Wednesday raised India’s GDP growth forecast for the current fiscal year by 40 basis points to 7.1 per cent, while stating that the Indian economy has remained resilient in navigating the global headwinds. However, he flagged the persisting global uncertainties and the El Nino impact on agricultural output as a risk to the economic outlook.

“Real GDP growth for 2026-27 is projected at 7.1 per cent; Q2 at 7.2 per cent; Q3 at 6.9 per cent; and Q4 at 6.8 per cent. The upward revision in growth forecast by 40 bps further underscores the strength of economic activity despite significant headwinds. Real GDP growth for Q1:2027-28 is projected at 7.1 per cent. The risks are evenly balanced,” RBI Governor Sanjay Malhotra said after the three-day Monetary Policy Committee (MPC) meeting.

India had registered a GDP growth of 7.8 per cent in FY26.

“The upward revision in growth forecast by 40 bps further underscores the strength of economic activity despite significant headwinds,” he said.

Rural demand likely to be impacted

He said the global economic uncertainty and supply chain disruptions are expected to have some bearing on domestic economic activity, while a weak southwest monsoon along with strong El Nino conditions may impact the upcoming rabi season and rural demand.

West Asia crisis impacts global economy

Malhotra said the sudden reescalation of the West Asia conflict in September and the consequent hardening and volatility in global crude prices soured global economic sentiments and heightened financial market volatility.

He added that global inflation is projected to increase sharply due to the escalating crude oil prices and food prices and will prompt monetary policy tightening by major central banks escalating energy costs and rising food prices.

“Lingering trade uncertainty, rising bond yields in advanced economies and an appreciating dollar are keeping global financial market sentiments nervous and fragile. Further tightening of global financial conditions, uncertainty about fair valuation of AI stocks, and an elusive resolution of the West Asia conflict pose significant downside risks to the global
economic outlook,” he said.

RBI to implement schemes that add to economic resilience

The RBI governor further said the central bank will implement policies that add to economic resilience amid global uncertainties.

“While these factors are weighing on the domestic growth-inflation outlook adversely, the inherent resilience and strength of the Indian economy are helping navigate through these challenging times. We shall implement policies that further add to this resilience. Accordingly, we shall strive for price and financial stability as both are essential for sustainable growth in the long run,” he said.