Reserve Bank of India Monetary Policy Committee on Wednesday marginally raised the GDP forecast for the current fiscal (FY27) to 6.7 per cent while slightly lowering the inflation projection to 5 per cent. RBI Governor Sanjay Malhotra, in his briefing post the three-day bi-monthly meeting, cautioned that the turbulent global economic environment is likely to have some bearing on domestic economic activity.

During its June policy review, the Reserve Bank of India (RBI) estimated that GDP growth for the 2026-27 fiscal year would reach 6.6 per cent, with inflation expected at 5.1 per cent.

Upward Pressure from Food Costs

While general inflationary pressures have stayed contained thus far, the RBI noted that the potential for rising costs in food, fuel, and other key inputs to spread and drive broader inflation remains a significant risk.

Announcing the decision of the Monetary Policy Committee, RBI Governor Sanjay Malhotra said the supply-side pressures caused by the West Asia conflict have eased somewhat since June 2026, leading to withdrawal of temporary measures undertaken by the government and normalisation of key input supplies.

"However, the re-escalation of the conflict since the first week of July has amplified volatility in energy prices and renewed uncertainty about supply chains," he said.

Amidst persistent global uncertainty, domestic economic activity has exhibited resilience as reflected by the high frequency indicators available for Q1:2026-27, he said.

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GDP And Inflation Rate Projection

The real GDP growth for 2026-27 is projected at 6.7 per cent, with Q1 at 7.0 per cent; Q2 at 6.4 per cent; Q3 at 6.5 per cent; and Q4 at 6.8 per cent, Malhotra said, adding that the risks are evenly balanced.

On inflation, he said the impact of El Niño on temporal and spatial rainfall distribution continues to remain a major risk, although proactive supply management and adequate stock of food grains should provide comfort.

Global oil prices have remained highly volatile with sharp two-way movements triggered by geopolitical developments, blurring the near-term outlook.

"Although generalised inflation pressures continue to remain modest so far, the risks of second-round impact of higher food, fuel and other input prices translating to broad-based inflation persist," the Governor added.

He said the Consumer Price Index (CPI) inflation for 2026-27 is projected at 5 per cent with Q2 at 4.7 per cent; Q3 at 5.9 per cent; and Q4 at 5.5 per cent.

Inflation for Q1:2027-28 is projected at 5.3 per cent with risks being evenly balanced. Core inflation is projected at 4.3 per cent for 2026-27. Core inflation, excluding precious metals, is projected to be lower, though it is likely to align with core inflation from Q4.

(With Inputs From PTI)