RBI GDP prediction: Reserve Bank of India keeps FY26 GDP forecast unchanged at 6.5%

The Reserve Bank of India (RBI) on Wednesday, August 6, kept its real GDP growth projections for the current fiscal year (2025-26) unchanged at 6.5% amid stability and opportunity during a time of global uncertainty.

The growth projections for FY26 are compared with the 6.5% economic growth recorded in the 2024-25 fiscal year.

The central bank has projected a growth rate of 6.5% for the first quarter of FY26 (April-June) and 6.7% for the second quarter (July-September). For the third (October-December) and fourth (January-March) quarters, the apex bank has projected economic growth at 6.6% and 6.3%, respectively.

The real gross domestic product (GDP) growth for the financial year 2026-27 has been projected at 6.6%.

The Reserve Bank of India's Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, maintained the status quo on the repo rate at 5.50% on Wednesday after three consecutive reductions totalling 100 basis points. The six-member panel, headed by Malhotra, started the three-day deliberation on the monetary policy on Monday.

The MPC voted unanimously to hold rates steady and maintained the policy stance at neutral amid evolving economic conditions. The neutral stance means that the RBI can either increase or decrease interest rates, depending on data related to inflation and economic growth.

The central bank has been tasked by the government to ensure that consumer price index (CPI)-based retail inflation remains at 4% with a margin of 2% on either side.

As for the growth outlook, the above-normal southwest monsoon, lower inflation, rising capacity utilisation and congenial financial conditions continue to support domestic economic activity, RBI said. The central bank expects supportive monetary, regulatory and fiscal policies, including robust government capital expenditure, to boost demand.

However, the headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook.

The MPC noted that the inflation outlook in the near term has become more benign than anticipated earlier, and the average CPI inflation this year is expected to remain significantly below the target. This is driven mainly by lower food inflation that entered deflationary territory in June.

However, CPI inflation is likely to edge up above the 4% target of RBI from Q4 this year onwards. Moreover, core inflation has been rising steadily from the recent low of 3.6% recorded during December-January 2024-25 and averaged 4.3% in Q1 this year. Core excluding precious metals has witnessed an uptick and averaged 3.4% in Q1.

“Growth has held up well with some pick-up expected in the coming festive season and is evolving in line with our assessment of 6.5% for 2025-26,” the central bank said.

“On balance, therefore, the current macroeconomic conditions, outlook and uncertainties call for continuation of the policy repo rate of 5.5% and waiting for further transmission of the front-loaded rate cuts to the credit markets and the broader economy,” it added.