RBI Raises FY27 Growth Outlook, Sees Strong Momentum in Consumption and Investment
The Reserve Bank of India (RBI) on Friday raised its real GDP growth projections for the first half of 2026–27, reflecting growing confidence in India’s economic momentum. RBI Governor Sanjay Malhotra announced that growth for Q1 and Q2 of FY27 is now projected at 6.9 per cent and 7.0 per cent, respectively.
The upward revision comes amid sustained domestic demand, improving investment conditions, and a supportive inflation environment.
Growth Outlook Strengthened
Explaining the rationale behind the revised forecast, Governor Malhotra said that multiple structural and cyclical factors are supporting economic expansion. He highlighted sustained buoyancy in the services sector, expected gains from GST rationalisation, healthy rabi crop prospects, monetary easing, and a benign inflation outlook as key drivers of private consumption.
“Investment activity, supported by high capacity utilisation, conducive financial conditions, healthy balance sheets of financial institutions and corporates, and robust credit growth, is expected to maintain its momentum,” Malhotra said.
He added that the government’s continued focus on capital expenditure is also strengthening the investment cycle, encouraging private sector participation.
Trade and External Sector Prospects
On the external front, the RBI Governor said that strong domestic demand is likely to attract fresh private investments, while exports are expected to benefit from upcoming trade agreements.
Services exports are projected to remain resilient, while merchandise exports may receive a boost from a prospective trade deal with the United States. Malhotra also pointed to the comprehensive trade agreement with the European Union, along with deals with New Zealand and Oman, as major steps towards diversifying India’s export base.
“These agreements should help strengthen the external sector and reduce overdependence on select markets,” he noted.
However, he cautioned that geopolitical tensions, uncertainty in global trade, volatile financial markets, and fluctuating commodity prices continue to pose downside risks to growth.
FY26 Performance and Sectoral Trends
Providing an update on the current financial year, Malhotra said that India’s real GDP is estimated to grow at 7.4 per cent in 2025–26, according to the First Advance Estimates.
Private consumption and fixed investment were the main contributors to growth, underlining improving household spending and corporate confidence. However, net external demand remained weak, as imports continued to outpace exports.
On the supply side, real Gross Value Added (GVA) growth of 7.3 per cent was driven by three major sectors: a buoyant services industry, resilient agriculture, and a gradual revival in manufacturing activity.
Economists view this broad-based sectoral recovery as a positive signal for medium-term stability.
Malhotra also addressed global economic conditions, noting that the world economy showed “remarkable resilience” in 2025. He attributed this to trade front-loading, moderate tariff impacts, fiscal stimulus, and accommodative monetary policies in major economies.
At the same time, he highlighted emerging challenges. Inflation, though easing, remains above target in several advanced economies. US bond yields continue to trade with an upward bias due to strong economic data and reduced expectations of near-term rate cuts.
Global equity markets, supported by investments in technology stocks, have advanced, but fiscal pressures, geopolitical risks, and divergent monetary policies are adding to market volatility.
On inflation, the RBI Governor said that price pressures are on a gradual downward trajectory, offering policymakers some room to support growth. However, he stressed that vigilance remains necessary, given external uncertainties and supply-side risks.
The central bank is expected to continue balancing growth support with inflation control in its upcoming policy decisions.
The RBI’s revised growth forecast signals growing institutional confidence in India’s economic fundamentals. Strong consumption, rising investments, improving trade prospects, and stable financial institutions are reinforcing the country’s position as one of the fastest-growing major economies.
For businesses and investors, the outlook suggests a favourable environment for expansion. For policymakers, it underlines the importance of sustaining reforms, infrastructure spending, and export diversification.
Market participants believe that if global conditions remain stable, India could outperform current projections in the medium term.
Our Final Thoughts
The RBI’s upward revision of FY27 growth reflects the resilience of India’s domestic economy and the strength of its investment cycle. While global risks persist, strong consumption, supportive policies, and expanding trade links are providing a solid foundation for sustained growth. The challenge ahead lies in managing external shocks while maintaining macroeconomic stability.