Robust Domestic Demand Behind RBI's 10 Bps Hike In FY27 GDP Forecast

The Reserve Bank of India (RBI) on Wednesday revised its FY27 GDP growth forecast upward to 6.7% from 6.6%, supported by steady domestic economic activity and better-than-expected performance in the first quarter.

The Monetary Policy Committee (MPC) decided to keep the policy repo rate unchanged at 5.25% and maintained its neutral policy stance. The decision was taken unanimously by the six-member committee.

The RBI said economic growth remains resilient but noted that the outlook continues to face risks from global trade developments and geopolitical uncertainties.

The central bank added that growth is expected to moderate during the current financial year despite the strong domestic foundation.

The RBI projected GDP growth at 7% for the first quarter of FY27, followed by 6.4% in the second quarter, 6.5% in the third quarter and 6.8% in the fourth quarter. The risks to the growth outlook were assessed as evenly balanced.

RBI Governor Sanjay Malhotra said the economy is estimated to have grown 7.6% in FY26, while the GDP growth estimate for FY27 was set at 6.9% in the MPC statement.

The central bank said further policy decisions would depend on greater clarity on inflation trends, including the overall direction and composition of price pressures.

Along with keeping the repo rate unchanged, the RBI maintained the Standing Deposit Facility (SDF) rate at 5%, while the Marginal Standing Facility (MSF) rate and Bank Rate remained unchanged at 5.50%.

The MPC’s decision came amid concerns over renewed tensions in West Asia and evolving inflation risks. The RBI projected consumer price index (CPI) inflation at 3.2% in the fourth quarter of FY26. For FY27, inflation is expected to rise to 4% in the first quarter and 4.2% in the second quarter.

The central bank said the neutral policy stance provides flexibility to respond to changing economic conditions while monitoring inflation and growth developments.