| Manufacturing, services, private consumption and investment continue to support economic activity.
Rising energy costs, supply disruptions and a weak monsoon pose risks to growth. Government capex, steady credit flows and stable employment are expected to support demand and investment. Global supply-chain disruptions, financial market volatility and weather shocks remain key downside risks. |
The Reserve Bank of India has projected real GDP growth at 6.6 per cent for 2026-27, lower than the estimated 7.6 per cent expansion in 2025-26, as rising input costs, global supply disruptions and monsoon-related uncertainties are expected to moderate economic momentum.
“Real GDP growth for 2026-27 is projected at 6.6 per cent, with Q1 at 6.6 per cent; Q2 at 6.3 per cent; Q3 at 6.5 per cent; and Q4 at 6.8 per cent. Prolonged global supply chain disruptions, volatility in global financial markets, and weather-related shocks continue to pose downside risks to the domestic growth outlook,” RBI Governor Sanjay Malhotra said in his Monetary Policy Statement
The RBI said domestic economic activity has remained largely steady despite the recent geopolitical conflict, with high-frequency indicators pointing to continued resilience in both manufacturing and services sectors. Business expectations also remain positive.
On the demand side, private consumption has remained resilient, supported by discretionary spending, while fixed investment has maintained momentum despite rising cost pressures. Merchandise exports recorded strong growth in April 2026 despite elevated freight and insurance costs, while services exports continued to benefit from sustained global demand.
The caution
The RBI, however, cautioned that rising prices of energy and other inputs, coupled with supply disruptions, are likely to weigh on economic activity going forward. Although diversification of imports could help ease supply constraints, it would come at a higher cost.
The central bank noted that the extent of the impact would depend on the duration of the conflict, the pace of supply-chain normalisation and how higher costs are shared across stakeholders. It added that the pass-through of higher energy prices to retail products is already becoming visible.
The projected deficiency in the south-west monsoon could also affect agricultural production and rural demand. However, initiatives such as crop diversification, water conservation, climate-resilient farming practices and the promotion of short-duration crops are expected to mitigate some of the adverse effects.
Supporting factors
According to the RBI, sustained momentum in the services sector, the continuing impact of GST rationalisation and broadly stable employment conditions should support urban consumption, although rising inflation could erode household purchasing power.
Government capital expenditure is expected to remain robust, while elevated capacity utilisation and continued credit flows from banks and non-bank lenders are likely to support corporate investment. Nevertheless, cost escalation and heightened uncertainty could dampen investor sentiment.
The RBI Governor said weak global demand and high logistics costs remain headwinds for merchandise exports, while services exports are expected to sustain their growth momentum due to healthy demand for Indian services.
The central bank also highlighted government measures aimed at supporting MSMEs and exporters, increasing domestic gas and crude production, promoting locally produced alternatives to imported inputs and diversifying critical imports as factors that could help cushion the economy against external shocks.
Source link
#RBI #sees #Indias #FY27 #GDP #growth #easing #global #risks #cost #pressures
