MUMBAI: The Reserve Bank of India announced on Wednesday that it is maintaining its GDP growth forecast for the current fiscal year at 6.5%, while reducing its inflation projection from 3.7% to 3.1%.
During the release of the third bi-monthly monetary policy for 2025-26, RBI Governor Sanjay Malhotra noted that the favorable southwest monsoon, declining inflation, increasing capacity utilization, and supportive financial conditions are all contributing positively to domestic economic activity.
The combination of strong monetary, regulatory, and fiscal policies, alongside significant government capital spending, is expected to drive demand. The services sector is predicted to maintain robust growth, particularly in construction and trade, over the upcoming months.
“While growth is strong and aligns with our projections, it remains below our optimal aspirations. Tariff uncertainties are still evolving. Monetary policy transmission is ongoing, and the effects of the 100 basis point rate cut since February 2025 are still materializing,” the Governor stated.
He added that domestic growth is stable and is aligned with assessments, despite some high-frequency indicators showing mixed results for May-June.
Malhotra noted that rural consumption is steady, though urban consumption, particularly in discretionary spending, is lagging.
He also highlighted that ongoing geopolitical tensions, global uncertainties, and fluctuations in international financial markets present risks to the growth outlook.
“Considering all these factors, real GDP growth for 2025-26 is projected at 6.5%, with estimates of 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4,” he indicated.
For Q1 of 2026-27, real GDP growth is forecasted at 6.6%, with evenly balanced risks.
On the topic of inflation, the Governor shared that the Consumer Price Index (CPI) fell for the eighth consecutive month to a 77-month low of 2.1% in June, largely due to a sharp decrease in food inflation.
“The inflation outlook for 2025-26 has turned more favorable than anticipated in June,” he commented.
The RBI projected CPI inflation for 2025-26 at 3.1%, with Q2 at 2.1%, Q3 at 3.1%, and Q4 at 4.4%. Retail inflation for Q1 of 2026-27 is anticipated at 4.9%, with balanced risks.
Malhotra concluded that as the Indian economy aims for a prominent position on the global stage, stronger policy frameworks across various domains—not just monetary policy—will be crucial in this endeavor.
