RBI projects 6.9% GDP growth for 2026-27 despite West Asia conflicts

The Reserve Bank of India (RBI) has stated that the outlook for the Indian economy remains positive despite emerging global challenges, according to its Annual Report for 2025-26. The central bank projected real GDP growth at 6.9% for 2026-27 while cautioning that risks remain tilted to the downside. The RBI identified the ongoing conflict in West Asia, elevated energy prices, supply chain disruptions, financial market volatility, uncertainty surrounding global trade policies, and weather-related disruptions as potential short-term challenges to growth and inflation. The report noted that healthy corporate and banking sector balance sheets, along with the government's continued emphasis on capital expenditure, support India's growth prospects.

On inflation, the RBI projected Consumer Price Index (CPI) inflation at 4.6% for 2026-27, with risks tilted to the upside. The report stated that inflationary pressures could rise due to external factors, particularly developments affecting global energy markets. It also noted that the central government, in consultation with the RBI, has retained the inflation target of 4% with a tolerance band of plus or minus 2% for the period from April 1, 2026, to March 31, 2031. The central bank added that agricultural performance and inflation trends would remain influenced by monsoon conditions and weather-related developments.

The report highlighted that the Centre remains committed to fiscal consolidation, with the gross fiscal deficit projected at 4.3% of GDP in 2026-27. It also noted the establishment of an Economic Stabilisation Fund to provide fiscal space against global headwinds. The RBI outlined plans to expand digital financial initiatives, including the Central Bank Digital Currency (CBDC), tokenisation pilots, and the Unified Lending Interface (ULI). On the external sector, the report stated that India's foreign exchange reserves stood at US$691.1 billion at the end of March 2026, providing an import cover of about 11 months and external debt cover of 90.3%, while helping cushion the economy against adverse global spillovers.