RBI Upgrades FY27 GDP Forecast, Cuts Inflation Outlook: What It Means For India's Economy
by Sakshi Arora · abp LiveThe RBI also projected real GDP growth of 7.3 per cent for Q1 FY28, indicating confidence that economic momentum will continue into the next financial year.
Written By : Sakshi Arora | Updated at : 05 Aug 2026 10:51 AM (IST)
Governor Malhotra said the Indian economy has performed better than expected during the April-June quarter of FY27, with high-frequency indicators pointing to resilient domestic demand.
Source : ABPLIVE AI
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Key points generated by AI, verified by newsroom
- RBI raises FY27 GDP forecast, lowers inflation to 5%.
- Indian economy remained resilient despite global market volatility.
- Geopolitical tensions, volatile energy, and monsoon risk persist.
The Reserve Bank of India (RBI) on Wednesday struck a cautiously optimistic note on the domestic economy, raising its FY27 GDP growth forecast to 6.7 per cent from 6.6 per cent while lowering its consumer price inflation (CPI) projection to 5 per cent from 5.1 per cent. The central bank, however, cautioned that renewed geopolitical tensions, volatile energy markets and weather-related risks continue to cloud the global and domestic outlook.
Despite these external headwinds, RBI Governor Sanjay Malhotra said the Indian economy has remained resilient, with domestic economic activity performing better than expected during the April-June quarter of FY27.
MPC Lowers Inflation Outlook
At the same time, the central bank revised its consumer price inflation (CPI) forecast downward to 5 per cent for FY27 from 5.1 per cent projected earlier, indicating an improved inflation outlook even as policymakers continue to monitor risks arising from elevated energy prices and global developments.
Governor Malhotra also highlighted that the services sector continues to display healthy momentum, which is expected to lend support to urban consumption and overall domestic demand in the coming quarters.
While upgrading the growth outlook and lowering its inflation forecast, the RBI reiterated that it remains watchful of evolving global and weather-related risks that could influence the domestic macroeconomic landscape in the months ahead.
Also Read : RBI MPC Lowers CPI Inflation To 5%, Says El Nino Continues To Be A Major Risk
Growth Outlook Revised Upward
Taking these factors into account, the MPC revised its FY27 GDP growth forecast upward to 6.7 per cent, while stating that risks to the outlook remain evenly balanced.
The revised growth projections are:
Q1 FY27: 7 per cent (Earlier: 6.6 per cent)
Q2 FY27: 6.4 per cent (Earlier: 6.3 per cent)
Q3 FY27: 6.5 per cent (Earlier: Unchanged)
Q4 FY27: 6.8 per cent (Earlier: Unchanged)
The RBI also projected real GDP growth of 7.3 per cent for Q1 FY28, indicating confidence that economic momentum will continue into the next financial year.
Global Risks Continue To Dominate
Explaining the rationale behind the revised projections, RBI Governor Sanjay Malhotra said the global economy has witnessed sharp and frequent market swings in 2026, driven by persistent inflation, changing monetary policy expectations and renewed geopolitical uncertainty.
The central bank noted that the brief relief following the temporary ceasefire in West Asia faded after hostilities resumed in July, keeping crude oil prices and global supply chain disruptions elevated. Several major central banks have tightened monetary policy in response to sticky inflation, while others continue to remain vigilant.
The RBI also highlighted that the US dollar has strengthened amid elevated bond yields, a hawkish Federal Reserve stance and continued support from AI-led productivity gains in the US economy. At the same time, global equity markets have remained volatile as investors reassessed their exposure to technology and artificial intelligence-related stocks.
According to the central bank, conflict in West Asia, volatile crude oil prices, persistent inflation expectations and fragile public finances in several advanced economies continue to pose downside risks to global growth.
Domestic Economy Remains Resilient
Despite these global challenges, Governor Malhotra said the Indian economy has performed better than expected during the April-June quarter of FY27, with high-frequency indicators pointing to resilient domestic demand.
Private consumption remained robust, while investment activity continued to gather pace, supported by healthy trends in construction, capital goods production and bank credit. External demand also remained supportive, with strong services exports complemented by a recovery in merchandise exports.
Looking ahead, the RBI expects domestic activity to remain resilient even as elevated energy prices and global supply chain pressures continue to create uncertainty.
Also Read : RBI MPC August 2026: Repo Rate Unchanged At 5.25%, MPC Retains Neutral Stance
Services, Infrastructure To Support Growth
The central bank believes sustained momentum in the services sector will continue to support urban consumption, while broadly stable employment conditions and the ongoing benefits of GST rationalisation are expected to strengthen domestic demand.
Investment activity is also likely to remain firm, backed by high capacity utilisation, robust credit growth and the government's continued focus on infrastructure spending. On the external front, the RBI expects services exports to remain healthy, while merchandise exports could benefit from recently concluded trade agreements and continued export diversification efforts.
However, the central bank flagged deficient and uneven south-west monsoon conditions amid El Nino as a key downside risk for agriculture and rural demand. It added that government initiatives such as crop diversification, climate-resilient farming and water conservation are expected to help cushion the impact.
Also Read : RBI MPC Lowers CPI Inflation To 5%, Says El Nino Continues To Be A Major Risk
Frequently Asked Questions
What is the Reserve Bank of India's (RBI) revised GDP growth forecast for FY27?
The RBI has raised its FY27 GDP growth forecast to 6.7% from the previous 6.6%. It also projects real GDP growth of 7.3% for Q1 FY28, indicating continued economic momentum.
How has the RBI adjusted its inflation outlook for FY27?
The RBI has lowered its consumer price inflation (CPI) projection for FY27 to 5% from 5.1%. This revision reflects an improved inflation outlook, though policymakers remain watchful of risks.
What are the key risks highlighted by the RBI for the economic outlook?
The RBI cautions about renewed geopolitical tensions, volatile energy markets, and weather-related risks, including El Nino. Global challenges like persistent inflation and fragile public finances also pose downside risks.
Despite global challenges, how is the Indian economy performing?
RBI Governor Sanjay Malhotra stated the Indian economy has remained resilient, performing better than expected during the April-June quarter of FY27. Robust private consumption and increased investment activity are key drivers.
About the author Sakshi Arora
Sakshi Arora is Chief Copy Editor at ABP Live English, working on business stories that track markets, global economies and key financial trends. A quick and dependable hand on the desk, she balances numbers with nuance, and is an expert on everything Personal Finance, Mutual Funds, and IPOs.
For any tips and queries, you can reach out to her at sakshia@abpnetwork.com.
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Published at : 05 Aug 2026 10:24 AM (IST)
Tags :
El Nino RBI Indian Economy West Asia GDP India GDP RBI MPC Live Updates Growth Outlook RBI MPC August 2026
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