The Reserve Bank of India (RBI) has revised its GDP growth projection for the financial year 2025-26 to 6.8%, while also lowering the inflation forecast to 2.6%. This pronouncement came on Wednesday during the RBI’s bi-monthly monetary policy meeting.
Previously, the RBI had pegged the GDP growth rate at 6.5% for FY26, alongside an inflation estimate of 3.1%. The decision reflects significant shifts in the domestic and global economic landscape.
Governor Sanjay Malhotra noted that developments such as an above-normal monsoon and the rationalisation of Goods and Services Tax (GST) rates have positively influenced these projections. “Buoyed by good monsoon, the Indian economy continues to exhibit strength by registering a higher growth in Q1 2025-26,” he stated.
Malhotra explained that the moderation in inflation is substantial. He highlighted that low inflation stems from a sharp decline in food inflation, supported by improved supply chains and government intervention measures. “Inflation conditions remain benign during 2025-26 so far, with actual outcomes turning out to be significantly lower than projected,” he emphasized.
According to the Governor, the revised GDP growth estimates indicate that Q2 2025-26 will see a growth rate of 7.0%, while Q3 and Q4 are projected at 6.4% and 6.2%, respectively. For the first quarter of 2026-27, he estimates the GDP growth to settle at 6.4%.
On the flippant side, Malhotra addressed how external factors, such as tariffs imposed by the United States, could dampen export prospects. He acknowledged this could affect the overall growth trajectory despite positive domestic indicators.
Expectations of inflation have also shifted dramatically. The Consumer Price Index (CPI) inflation is now set at 2.6%, with Q2 and Q3 both anticipated at 1.8%, while Q4 is predicted to reach 4.0%. The inflation forecast for the first quarter of 2026-27 is also projected at 4.5%.
Malhotra concluded by noting the contained core inflation level, which remains at 4.2% as of August, despite price pressures arising from precious metals. This provides a cautiously optimistic outlook as the RBI reassesses macroeconomic indicators.
The RBI’s proactive stance and revised projections reflect a confident recovery trajectory amid various global uncertainties, thereby fostering an environment conducive to growth.
