Mumbai: India’s economy remains resilient despite growing global uncertainty, with the Reserve Bank of India (RBI) expecting strong domestic demand, healthy investment and improving exports to support growth during FY27.
Presenting the Monetary Policy Committee’s assessment, RBI Governor Sanjay Malhotra said the economy continued to display strength despite geopolitical tensions, volatile commodity prices and uncertainty surrounding global trade.
Growth Forecast Raised
The RBI increased its FY27 real GDP growth forecast to 6.7 percent from 6.6 percent.
The central bank expects the economy to expand by 7 percent in the first quarter, 6.4 percent in the second, 6.5 percent in the third and 6.8 percent in the fourth quarter.
Private consumption remained strong, while construction activity, capital goods production and bank credit continued to indicate resilient investment demand.
High-frequency indicators also pointed towards sustained economic momentum during the first quarter of FY27 despite increasing global challenges.
Exports Show Recovery
Early corporate earnings suggested healthy manufacturing activity, while services exports maintained their momentum and merchandise exports showed signs of recovery.
Recent trade agreements and India’s efforts to diversify export markets are expected to strengthen overseas demand over the medium term.
The RBI Governor said strong capacity utilisation, healthy credit growth and the government’s continued infrastructure spending would support capital expenditure.
Stable employment conditions, an expanding services sector and GST rationalisation are also expected to reinforce urban consumption and support broader economic growth.
Global Risks Persist
Despite the improved outlook, Malhotra warned that the global environment remained highly uncertain.
Escalating geopolitical conflicts, volatile energy prices, fresh supply-chain disruptions and slowing global demand could pose significant downside risks to India’s economic activity.
Weather conditions also remain a key source of uncertainty. An uneven south-west monsoon under El Niño conditions could affect agricultural output and weaken rural demand.
However, government measures promoting crop diversification, climate-resilient farming, short-duration crop varieties, water conservation and improved irrigation are expected to soften the impact.
Inflation Forecast Lowered
The RBI reduced its FY27 consumer price inflation forecast to 5 percent while keeping the repo rate unchanged at 5.25 percent.
Inflation is projected at 4.7 percent in the second quarter, 5.9 percent in the third and 5.5 percent in the fourth quarter.
Headline inflation rose to 4.4 percent in June after remaining below the RBI’s 4 percent target for 16 consecutive months.
Core inflation remained moderate at 3.9 percent. Excluding precious metals, it stayed between 2.3 percent and 2.5 percent, indicating that underlying demand-driven price pressures continued to remain contained.
