The Reserve Bank of India (RBI) announced on Wednesday that it has raised its GDP growth projection for the fiscal year 2025-26 to 6.8 percent from a previous estimate of 6.5 percent. The bank also lowered its inflation forecast to 2.6 percent, attributing the changes to an above-normal monsoon and adjustments in Goods and Services Tax (GST) rates.
During the bi-monthly monetary policy meeting, RBI Governor Sanjay Malhotra highlighted significant domestic developments as well as a shifting global economic landscape, which have influenced India’s growth-inflation dynamics. “Buoyed by good monsoon conditions, the Indian economy continues to demonstrate robust performance, with higher growth reported in Q1 of 2025-26,” Malhotra stated.
The RBI’s latest estimates suggest that the GDP growth for the second quarter will reach 7.0 percent, followed by 6.4 percent in the third quarter and 6.2 percent in the fourth quarter. For the first quarter of 2026-27, the RBI predicts a growth rate of 6.4 percent.
Moreover, Malhotra noted that the moderation in inflation remains a positive outcome of improved agricultural conditions and governmental efforts to enhance supply chains. “CPI inflation for 2025-26 is now projected at 2.6 percent, with Q2 at 1.8 percent, Q3 also at 1.8 percent, and Q4 at 4.0 percent,” he elaborated, adding that the consumer price index-based inflation for the first quarter of 2026-27 is anticipated to be 4.5 percent.
The RBI’s earlier estimation in August had set the GDP growth for FY26 at 6.5 percent while inflation was projected at 3.1 percent. The downward revision in inflation estimates showcases the effectiveness of the government’s policy measures to ensure the availability of essential goods, particularly food items, which have seen significant price reductions.
Malhotra explained that core inflation, while remaining stable, recorded an index level at 4.2 percent in August. Despite ongoing pressures from precious metals, the rate remains manageable, reflecting the underlying strength of the economy.
On the other hand, Malhotra cautioned that external factors like the tariffs imposed by the United States are expected to moderate export growth, which could pose challenges ahead. However, he remains optimistic about the overall economic outlook, driven mainly by local consumption and the anticipated welfare from tax reforms.
As the Reserve Bank reassesses monetary policies, stakeholders across sectors will closely monitor these adjustments. The proactive stance taken by the RBI signals potential economic resilience amid global uncertainties.
