RBI walks tightrope: slower growth, stable prices
Trims growth view to 6.9% as risks rise|Inflation at 4.6%, but risks ticking up
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Mumbai: The Reserve Bank of India (RBI) on Wednesday projected India’s GDP growth at 6.9 per cent for FY27, lower than the estimated 7.6 per cent for FY26, citing elevated commodity prices and supply chain disruptions stemming from the West Asia crisis.
Unveiling the first bi-monthly monetary policy, RBI Governor Sanjay Malhotra said merchandise exports could be hit by disruptions in key shipping routes and rising freight and insurance costs. However, domestic demand is expected to remain supported by strong services sector momentum, GST rationalisation, rising manufacturing capacity utilisation, and healthy corporate and banking sector balance sheets.
“India’s macroeconomic fundamentals exuded confidence with buoyant growth and low inflation, though conditions turned adverse in March due to intensifying geopolitical tensions,” he said. The RBI noted that higher input costs due to energy prices, along with supply chain constraints, could weigh on growth. Still, government measures to support exports and stabilise supply chains may cushion the impact. The Monetary Policy Committee (MPC) flagged downside risks to growth amid uncertainty over the intensity and duration of the West Asia conflict. For FY27, quarterly GDP growth is projected at 6.8 per cent (Q1), 6.7 per cent (Q2), 7 per cent (Q3), and 7.2 per cent (Q4).
On inflation, the RBI projected retail inflation at 4.6 per cent for FY27, within the target band of 4 per cent (+/- 2 per cent). Quarterly projections stand at 4 per cent (Q1), 4.4 per cent (Q2), 5.2 per cent (Q3), and 4.7 per cent (Q4). The MPC observed that inflation remains below target but warned of upside risks from rising energy prices and potential weather-related food price shocks. Core inflation remains muted, though supply disruptions could create uncertainty.
