The Reserve Bank of India, during its June policy meeting on Friday, reduced its growth forecast for financial year 2026-27 to 6.6% from the previous 6.9%, citing the Middle East conflict, higher crude oil prices, and potential Southwest monsoon disruptions.
India’s GDP growth for the year ended March 31, 2026, is estimated at 7.6%, with official figures due later that evening.
RBI Governor Sanjay Malhotra also increased the inflation projection for the year to 5.1% from 4.6%.
Underlying inflation pressures remain contained for now, Malhotra noted. However, he warned that broader effects on expectations and wages could emerge, requiring careful monitoring. The outlook is further uncertain due to a below-normal monsoon forecast and El Niño risks.
As the West Asia conflict continues without resolution, risks to both inflation and growth have risen, the governor stated. Domestic activity has stayed largely stable so far, but signs point to future disruption.
Higher energy and commodity prices along with supply chain issues are expected to weigh on economic activity.
The RBI therefore lowered its FY27 GDP growth estimates. Growth for the first quarter is now seen at 6.6%, down from 6.9%, and for the second quarter at 6.3%, below the earlier 6.8%.
Growth is projected to improve in the second half, with the third quarter at 6.5% and the fourth at 6.8%, compared with prior estimates of 7% and 7.2%.
Prolonged global supply disruptions, financial market volatility, and weather shocks remain downside risks to growth, the governor said.
As anticipated, the RBI kept the policy repo rate steady at 5.25%. All six members of the monetary policy committee voted to maintain rates and continue the neutral stance.
The central bank noted that monetary policy has become more cautious amid difficult choices. Major advanced economy central banks may shift toward tighter policy.
