RBI Raises FY27 GDP Forecast to 6.7%

The Reserve Bank of India (RBI) has revised its FY27 GDP growth forecast upward to 6.7% from 6.6%, citing steady domestic economic activity and a better-than-expected performance in the first quarter.

This decision was made by the Monetary Policy Committee (MPC), which unanimously decided to keep the policy repo rate unchanged at 5.25% and maintain its neutral policy stance.

According to the RBI, economic growth remains resilient, but the outlook continues to face risks from global trade developments and geopolitical uncertainties. The central bank expects growth to moderate during the current financial year, despite a strong domestic foundation.

The RBI has projected GDP growth at 7% for the first quarter of FY27, followed by 6.4% in the second quarter, 6.5% in the third quarter, and 6.8% in the fourth quarter. The risks to the growth outlook are assessed as evenly balanced.

RBI Governor Sanjay Malhotra stated that the economy is estimated to have grown 7.6% in FY26, while the GDP growth estimate for FY27 was set at 6.9% in the MPC statement. The central bank will make further policy decisions based on greater clarity on inflation trends.

Along with keeping the repo rate unchanged, the RBI maintained the Standing Deposit Facility (SDF) rate at 5%, while the Marginal Standing Facility (MSF) rate and Bank Rate remained unchanged at 5.50%.

The MPC's decision comes amid concerns over renewed tensions in West Asia and evolving inflation risks. The RBI projected consumer price index (CPI) inflation at 3.2% in the fourth quarter of FY26. For FY27, inflation is expected to rise to 4% in the first quarter and 4.2% in the second quarter.

The neutral policy stance provides flexibility to respond to changing economic conditions while monitoring inflation and growth developments.

The RBI's decision to raise the GDP forecast is a positive sign for the Indian economy, indicating a strong domestic demand. However, the central bank remains cautious due to global uncertainties and inflation risks.

In conclusion, the RBI's decision to hike the GDP forecast while keeping policy rates unchanged reflects the central bank's efforts to balance growth and inflation. The Indian economy is expected to grow at a moderate pace, driven by domestic demand, but faces risks from global developments.