The Reserve Bank of India (RBI) has lowered its inflation forecast for FY26 to 2.6 per cent, down from the earlier estimate of 3.1 per cent, while revising the country’s GDP growth outlook upwards to 6.8 per cent from 6.5 per cent.
Quarterly CPI projections for FY26 are 1.8 per cent each for Q2 and Q3, followed by 4 per cent in Q4. For Q1 of FY27, inflation is projected at 4.5 per cent.
RBI Governor Sanjay Malhotra noted that “the risks are evenly balanced” and mentioned that the decline in inflation is largely due to lower food prices, improved supply conditions, and the rationalisation of GST rates.
The recent GST adjustments are expected to reduce prices of several items in the CPI basket, making overall inflation softer than the August projections.
The Monetary Policy Committee (MPC) unanimously decided to keep the repo rate at 5.5 per cent and maintain a neutral policy stance.
Other key rates, including the Standing Deposit Facility at 5.25 per cent and the Marginal Standing Facility and bank rate at 5.75 per cent, remain unchanged.
On the growth front, the RBI revised real GDP growth for FY26 to 6.8 per cent, with quarterly projections of 7 per cent in Q2, 6.4 per cent in Q3 and 6.2 per cent in Q4. For Q1 of FY27, growth is expected at 6.4 per cent.
Governor Malhotra cautioned that ongoing tariff and trade policy uncertainties, prolonged geopolitical tensions, and volatility in international financial markets could weigh on external demand. However, he added that the implementation of structural reforms, including GST streamlining announced by the Prime Minister, is expected to mitigate some of these adverse effects. |
