The RBI has upped the FY26 real GDP growth projection by 50 basis points (bps) to 7.30 per cent and cut the CPI inflation projection by 60 basis points to 2 per cent.
These aforementioned revisions came even as Governor Sanjay Malhotra announced the rate-setting panel’s unanimous decision to cut the repo rate by 25 bps from 5.50 per cent to 5.25 per cent.
Malhotra said: “The MPC concluded that there has been a significant moderation in inflation. Moreover, the prevailing global uncertainties and tariff related developments are likely to decelerate growth in H2 2025-26 and beyond.”
GDP growth projection up
The Governor noted that looking ahead, domestic factors such as healthy agricultural prospects, continued impact of GST rationalisation, benign inflation, healthy balance sheets of corporates and financial institutions and congenial monetary and financial conditions should continue to support economic activity. Continuing reform initiatives would further facilitate growth.”
“On the external front, services exports are likely to remain strong, while merchandise exports face some headwinds. External uncertainties continue to pose downside risks to the outlook, while speedy conclusion of ongoing trade and investment negotiations present upside potential,” he said.
Taking all these factors into consideration, real GDP growth for 2025-26 is projected at 7.3 per cent (6.8 per cent), with Q3 at 7.0 per cent (6.4 per cent); and Q4 at 6.5 per cent (6.2 per cent ).
Real GDP growth for Q1 2026-27 is projected at 6.7 per cent (6.4 per cent) and Q2 at 6.8 per cent (new projection). The risks are evenly balanced.
Retail inflation projection cut
Referring to the headline CPI inflation declining to an all-time-low (of 0.25 per cent) in October 2025, the Governor observed that overall, the decline in inflation has become more generalised.
“Turning to the inflation outlook, food supply prospects remain bright on the back of higher kharif production, healthy rabi sowing, adequate reservoir levels and conducive soil moisture. Barring some metals, international commodity prices are likely to moderate going forward.”
“Overall, inflation is likely to be softer than what was projected in October, mainly on account of the fall in food prices,” he said.
Considering all these factors, CPI inflation for 2025-26 is now projected at 2.0 per cent (2.6 per cent) with Q3 at 0.6 per cent (1.8 per cent); and Q4 at 2.9 per cent (4.0 per cent).
CPI inflation for Q1 2026-27 and Q2 are projected at 3.9 per cent ( 4.5 per cent) and 4.0 per cent (new projection), respectively.
Source from: https://www.thehindubusinessline.com/economy/rbi-raises-fy26-gdp-growth-projection-to-73-from-68/article70360622.ece
