05 June,2026 12:20 PM IST | Mumbai | Tarun Verma
RBI projects steady growth, flags global market volatility and inflation risks (Pic/Screengrab from X)
The Reserve Bank of India (RBI) on Friday projected real GDP growth for 2026-27 at 6.6 per cent - with Q1 at 6.6 percent, Q2 at 6.3 per cent, Q3 at 6.5 per cent; and Q4 at 6.8 per cent - saying that prolonged global supply chain disruptions, volatility in global financial markets, and weather-related shocks continue to pose downside risks to the domestic growth outlook.
India's manufacturing and services PMI suggest that both sectors continue to be resilient, and business expectations are still positive, said RBI Governor Sanjay Malhotra after the three-day MPC meeting.
"On the demand side, private consumption, aided by discretionary spending, has remained resilient so far. Fixed investment has also maintained its momentum despite cost pressures. Merchandise exports recorded strong growth in April 2026, notwithstanding elevated freight and insurance costs," he noted.
Services exports have also remained robust, reflecting sustained demand despite concerns about AI.
Malhotra, while expressing about the economic dynamics, said, "Overall, the economic situation has broadly exhibited resilience and withstood the conflict spillovers, although the impact of cost pressures is becoming visible."
He further stated that CPI inflation remains below the target despite global shocks, as the pass-through to domestic prices has been limited.
He highlighted, "While the baseline projections point towards headline inflation firming up towards the upper tolerance level in Q3 2026-27, the impact of the supply shock is expected to wane in Q4 onwards. The underlying inflation pressures continue to remain benign at this juncture."
The Central Bank projected CPI inflation for 2026-27 at 5.1 per cent, with Q1 at 4.2 per cent; Q2 at 5.1 per cent; Q3 at 5.9 per cent; and Q4 at 5.4 per cent.
"Core inflation is projected at 4.7 per cent for 2026-27. These forecasts are subject to upside risks due to global supply chain disruptions, global commodity price shocks, uncertainty about the spatial and temporal distribution of the south-west monsoon and El Nino conditions. Adequate stock of food grains and satisfactory reservoir levels, however, provide some comfort," said Malhotra.
Sumit Singhania, Head of Research at Bajaj Broking, while highlighting a strategy, said, "The Reserve Bank of India has adopted a pragmatic 'wait-and-watch' strategy, holding the repo rate unchanged at 5.25 per cent amidst a highly turbulent global backdrop."
He further added, "While domestic demand, private consumption, and services exports have exhibited strong resilience, intensifying global conflicts, supply disruptions, and elevated energy prices are beginning to weigh on economic activity. Compounded by a sub-normal monsoon forecast and El Niño risks, the RBI chief noted considerable risks to both growth and inflation, choosing to remain strictly data-dependent until greater clarity emerges
Anuj Puri, Chairman of ANAROCK Group, while expressing his views on RBI's Monetary Policy, said, "The RBI's Monetary Policy Committee (MPC) decision to keep the repo rate unchanged is a key anchor for the Indian residential real estate market. The sector is witnessing strong annual growth amid short-term geopolitical shocks, and this rate pause reflects rising consumer pressures and volatile construction environments."
He further added, "External vulnerabilities have tested the broader macroeconomic environment in early 2026. The ongoing war in the Middle East is having direct economic effects, including higher global oil prices and higher domestic construction costs. This sort of supply-side inflation is putting pressure on developers. Second, rising geopolitical uncertainty has led many potential Middle Eastern investors, who tend to put large amounts of money into Indian housing, to pause their buying. Constant borrowing costs mean that the market is not being punished by rising material costs and rising loan rates."
