May 29: The Reserve Bank of India (RBI) has said that the Indian economy is expected to remain resilient in 2026–27, supported by strong domestic fundamentals, even as global uncertainties continue to pose challenges to growth and inflation.
In its Annual Report for 2025–26, the central bank maintained a positive outlook on India’s growth trajectory but cautioned that geopolitical tensions—particularly in West Asia—along with elevated energy prices, global supply chain disruptions, financial market volatility, trade policy uncertainty, and weather-related risks could weigh on economic momentum in the near term.
The RBI has projected real GDP growth at 6.9% for 2026–27, while noting that risks are tilted to the downside. It said sustained government capital expenditure, along with healthy balance sheets in the corporate and banking sectors, will continue to support investment activity and overall economic stability.
On inflation, the central bank expects price pressures to remain elevated, with CPI inflation projected at 4.6% for 2026–27, with risks tilted to the upside. It reiterated the monetary policy framework that targets 4% inflation within a tolerance band of ±2%, extending through March 2031.
The report highlighted that agricultural output and rural demand will remain closely linked to monsoon performance, making weather conditions a key factor influencing both growth and inflation outcomes.
On fiscal performance, the RBI noted that the central government remains committed to fiscal consolidation. The Gross Fiscal Deficit is projected at 4.3% of GDP in 2026–27, reflecting continued efforts to maintain fiscal discipline while supporting growth. It also highlighted the establishment of an Economic Stabilisation Fund to help absorb external shocks.
The central bank further pointed to ongoing financial sector reforms, including the expansion of the Central Bank Digital Currency (CBDC), pilot projects for tokenisation of financial assets, and the scaling up of the Unified Lending Interface (ULI), aimed at improving credit access and financial efficiency.
On the external sector, the RBI said India’s foreign exchange reserves—at around $691.1 billion as of March 2026—remain adequate by global standards, providing strong buffers against external volatility. These reserves offer import cover of about 11 months and help cushion the economy from global spillovers.
Despite ongoing global headwinds, the report noted that external pressures have remained contained, with net exports contributing only marginally to growth in 2025–26.
Overall, the RBI said India’s macroeconomic outlook remains stable, supported by robust domestic demand, prudent fiscal management, and a resilient financial system, even as global challenges persist.