The Reserve Bank of India (RBI) on Wednesday raised economic growth forecast for FY27.
The central bank now projects India's real GDP growth at 7.1% in FY27 as against 6.7% projected earlier.
India's GDP growth for the second quarter of FY27 is projected at 7.2% as against 6.4% seen earlier. Econmic growth for Q3FY27 is seen at 6.9% as compared with 6.5% seen earlier, while the projection for Q4FY27 GDP growth is kept unchanged at 6.8%.
However, RBI slashed Q1FY28 growth forecast to 7.1% from 7.3% earlier.
“The upward revision in growth forecast by 40 bps further underscores the strength of economic activity despite significant headwinds,” RBI Governor Sanjay Malhotra said in his monetary policy speech.
The RBI's Montary Policy Committee (MPC) unanimously voted to increase the policy repo rate by 25 basis points to 5.50%, and decided to change the stance to ‘calibrated tightening' from ‘Neutral'.
It underscored that given the current conditions, rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving conditions and the outlook.
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“The duration and extent of the rate hike cycle would be contingent on the actual growth-inflation developments and outlook, especially that of underlying inflation, the extent of broadening of price pressures and second round effects of the supply shock, as also the impact of demand impulses,” RBI Governor said.
The governor noted that global headwinds from protracted geopolitical tensions, elevated international commodity prices, additional frictions in global trade and tightening of global financial conditions may weigh on growth outlook.
“High frequency indicators available so far suggest that economic activity is holding momentum in Q2, albeit with some moderation compared to the preceding quarter. Despite deficient and uneven southwest monsoon, kharif sowing, although somewhat above its normal level, has been marginally lower than last year,” Malhotra said.
Additionally, he noted that manufacturing activity, despite cost pressures, is holding well, as indicated by IIP and PMI. Services sector activity remained steady and broad-based, owing to buoyant domestic and external demand.
Both manufacturing PMI and services PMI remained in expansionary zone in Q2:2026-27, although the pace of expansion slowed from Q1.
“Private consumption remained broadly resilient in Q2, with continued support from discretionary spending. Fixed investment remained strong as evident from several related indicators. Some weakness is, however, observed in segments such as non-durable goods and domestic air passenger traffic,” he said.
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