RBI lowers FY27 GDP forecast to 6.6%, sees inflation rising to 5.1% amid oil shock, global risks – Firstpost

The Reserve Bank of India (RBI) has lowered its economic growth forecast for FY27 while raising its inflation projection, citing rising global uncertainties, elevated energy prices, geopolitical tensions, and supply-side disruptions.

Announcing the outcome of the Monetary Policy Committee (MPC) meeting on Friday, RBI Governor Sanjay Malhotra said India’s real GDP growth is now projected at 6.6 per cent for FY27, lower than the 6.9 per cent estimated in the April policy review.

“There is huge uncertainty and downside risk,” Malhotra said, highlighting risks from the ongoing conflict in West Asia, volatility in global financial markets and disruptions in global supply chains.

According to the RBI’s revised estimates, GDP growth is expected at 6.6 per cent in Q1, 6.3 per cent in Q2, 6.5 per cent in Q3 and 6.8 per cent in Q4 of FY27.

The central bank said domestic demand continues to remain resilient, supported by activity in manufacturing and services. However, rising prices of energy and other inputs, along with supply constraints, could weigh on economic momentum.
“The rise in prices of energy and other inputs, coupled with supply disruption, is likely to weigh on economic activity,” Malhotra said.

On inflation, the RBI projected Consumer Price Index (CPI) inflation at 5.1 per cent for FY27, driven by higher crude oil prices and external supply shocks.

The Governor said inflation has remained below target despite global shocks as the pass-through of higher international prices into domestic inflation has so far been limited. However, the central bank warned that risks remain due to the possibility of broader price pressures affecting expectations and wages.

The RBI also flagged uncertainty around food prices due to risks from the southwest monsoon and El Nino conditions, which could impact agricultural output and rural demand.

Despite the challenges, Malhotra said policy measures including support for MSMEs, export sectors, domestic production initiatives and diversification of critical imports are expected to provide support to the economy.

The MPC kept the repo rate unchanged at 5.25 per cent and maintained its neutral stance, signalling that future policy decisions will depend on incoming data and the evolution of global risks.