India's economic growth continues to remain resilient despite an increasingly challenging global backdrop, with the Reserve Bank of India raising its FY27 GDP growth forecast by 10 basis points to 6.7%, Governor Sanjay Malhotra said on Wednesday while announcing the Monetary Policy Committee's decision to keep the repo rate unchanged at 5.25% and retain its neutral policy stance.
Malhotra said India's position as the fastest-growing major economy has been reinforced, even though growth is expected to be lower than the previous fiscal year. He said growth continues to be supported by resilient domestic demand, with private consumption driven by buoyant discretionary spending.
The governor said the central bank has seen resilience in domestic high-frequency indicators, while early June-quarter corporate earnings have also exhibited resilience. He added that merchandise exports have rebounded with double-digit growth, helping the overall Indian economy perform better than expected in the first quarter.
The RBI now expects GDP growth at 7% in the first quarter, 6.4% in the second quarter, 6.5% in the third quarter and 6.8% in the fourth quarter, taking the full-year FY27 growth estimate to 6.7%. Malhotra said risks to growth remain evenly balanced.
He said supply-side pressures arising from the West Asia conflict have eased somewhat since June, with key input supplies normalising. However, the re-escalation of the conflict has renewed uncertainty over global supply chains, which remains a downside risk to growth.
Malhotra said prospects for agriculture remain clouded due to the progress of the southwest monsoon, but expressed confidence that government initiatives would help mitigate the impact of deficient rainfall. He added that strong allied sector activity could cushion the impact of an uneven monsoon on the rural economy.
He also said the growing diversification of global supply chains is expected to mitigate the impact on India's manufacturing sector, while strong capacity utilisation, robust credit growth and the government's continued thrust on infrastructure spending are expected to sustain investment activity.
The governor, however, cautioned that renewed tensions in West Asia, volatility in global financial markets and weather-related shocks continue to pose downside risks to growth.
Setting the global context, Malhotra said the West Asia conflict continues to challenge the global economy and affect macroeconomic conditions, while trade uncertainty persists following fresh US tariffs. He added that the global economic environment has become more challenging, with some central banks tightening monetary policy while others have remained vigilant.
On inflation, Malhotra said headline inflation has edged above the target as expected, largely due to food and fuel prices, although there is little evidence so far of broader-based price pressures. Headline inflation is expected to rise further in the near term, peak in the third quarter and moderate thereafter, while core inflation remains moderate and is expected to decline after peaking in Q3.
He added that the MPC would maintain a close vigil, stressing that greater clarity is needed, particularly on inflation, and that any future policy action would require recalibration of the policy rate in line with evolving growth dynamics.
ALSO READ: Check All The Live Stock Market Updates Here
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.