RBI raises FY26 GDP growth forecast to 6.8%, cuts inflation projection to 2.6%

The Reserve Bank on Wednesday raised the GDP growth forecast for the current financial year to 6.8% on the back of a strong monsoon and GST rationalisation, even as it sharply lowered the inflation outlook to 2.6%.

Announcing the outcome of the three-day meeting of the Monetary Policy Committee (MPC), RBI Governor Sanjay Malhotra said the policy repo rate has been kept unchanged at 5.5%.

The decision to keep the policy rate steady was taken unanimously, with the stance maintained at “neutral”, Malhotra said.

“Economic activity has remained resilient with real GDP surprising on the upside at 7.8% and GVA at 7.6% for Q1 this year,” he added.

The central bank now projects GDP growth at 6.8% in 2025-26, higher than the 6.5% estimated earlier. Growth is seen at 7% in Q2, 6.4% in Q3 and 6.2% in Q4 of this fiscal, while the first quarter of 2026-27 is pegged at 6.4%.

On inflation, Malhotra said the trajectory has turned “even more benign” with food prices easing and GST rate rationalisation expected to further reduce price pressures.

Headline CPI inflation declined to its eight-year low of 1.6% YoY in July 2025 before rising to 2.1% in August, its first increase after nine months.

The RBI now expects headline CPI inflation at 2.6% for 2025-26, down from 3.1% projected in August. Inflation is seen at 1.8% in Q2, 4% in Q4 and 4.5% in Q1 of the next fiscal.

The central bank has been tasked by the government to ensure that Consumer Price Index (CPI) based retail inflation remains at 4 per cent with a margin of 2 per cent on either side.

The retail inflation has remained below 4% since February this year. It eased to a six-year low of 2.07% in August, aided by an easing of food prices and a favourable base effect.