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RBI raises FY26 GDP growth projection to 6.8 pc, lowers inflation forecast to 2.6 pc

The Reserve Bank on Wednesday revised upward its growth estimates for the current fiscal year to 6.8 per cent and lowered its inflation projection to 2.6 per cent based on an above-normal monsoon and the rationalisation of GST rates.

RBI raises FY26 GDP growth projection to 6.8 pc, lowers inflation forecast to 2.6 pc

RBI raises FY26 GDP growth projection to 6.8 pc, lowers inflation forecast to 2.6 pc Photograph: (RBI)

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The Reserve Bank on Wednesday revised upward its growth estimates for the current fiscal year to 6.8 per cent and lowered its inflation projection to 2.6 per cent based on an above-normal monsoon and the rationalisation of GST rates.

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In August, the Reserve Bank of India (RBI) projected a 6.5 per cent GDP growth rate for 2025-26, along with an inflation forecast of 3.1 per cent.

Announcing the bi-monthly monetary policy, Reserve Bank Governor Sanjay Malhotra said significant developments on the domestic front, amid a rapidly changing global economic landscape, have altered the narrative on growth-inflation dynamics in India.

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"Buoyed by good monsoon, the Indian economy continues to exhibit strength by registering a higher growth in Q1 2025-26. At the same time, there has been a considerable moderation in headline inflation," he said.

On rationalisation of the Goods and Services Tax (GST) rates, he said it is likely to have a sobering impact on inflation, while stimulating consumption and growth.

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However, US tariffs, on the other hand, will moderate exports, the Governor added.

"Taking all these factors into account, real GDP growth for 2025-26 is now projected at 6.8 per cent, with Q2 at 7.0 per cent, Q3 at 6.4 per cent, and Q4 at 6.2 per cent," he said, adding GDP growth for the first quarter of 2026-27 is estimated at 6.4 per cent.

Malhotra further said inflation conditions remained benign during 2025-26 so far, with actual outcomes turning out to be significantly lower than projected.

Low inflation, he said, is primarily attributed to a sharp fall in food inflation, aided by improved supply prospects and government measures to manage the supply chain effectively.

ALSO READ: RBI May Announce 25 Bps Rate Cut Amid Falling Inflation: Union Bank Report

Core inflation remained largely contained with the August reading at 4.2 per cent, despite continued price pressures on precious metals.

"CPI inflation for 2025-26 is now projected at 2.6 per cent with Q2 at 1.8 per cent; Q3 at 1.8 per cent; and Q4 at 4.0 per cent," Malhotra added. The Consumer Price Index (CPI) based inflation for the first quarter of 2026-27 is projected at 4.5 per cent.

PTI

RBI
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