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RBI turns more hawkish on inflation even as it raises its growth outlook, setting the stage for a sharper policy balancing act
The Reserve Bank of India (RBI) has raised its FY27 CPI inflation forecast to 5.2 per cent from 5 per cent projected in its October policy, signalling stronger price pressures ahead. At the same time, the central bank has upgraded its real GDP growth forecast to 7.1 per cent for FY27, from 6.7 per cent earlier.
The RBI expects inflation to remain elevated through the latter part of the financial year. CPI inflation is projected at 4.9 per cent in the second quarter, 6 per cent in the third quarter and 5.7 per cent in the fourth quarter of FY27.
The upward revision to the inflation outlook comes alongside the RBI Monetary Policy Committee’s decision to raise the repo rate by 25 basis points to 5.50 per cent and shift its policy stance to ‘calibrated tightening’.
The higher inflation forecast highlights the central bank’s growing concerns over price pressures and strengthens the case for tighter monetary policy.
Despite the more challenging inflation outlook, the RBI has raised its assessment of India’s economic growth. The FY27 real GDP growth forecast has been increased to 7.1 per cent from 6.7 per cent, reflecting continued confidence in domestic demand and the resilience of the Indian economy despite global uncertainties.
More from BusinessThe latest projections put the RBI in a delicate policy balancing act. While stronger growth gives the central bank room to focus on inflation, the sharp rise in projected price pressures could require monetary policy to remain tighter for longer.
The combination of a 7.1 per cent growth forecast and 5.2 per cent inflation projection highlights the RBI’s central challenge for FY27: containing inflation without undermining the momentum of the Indian economy.
