Reserve Bank of India projects 6.9% GDP growth for India in FY27 despite global tensions

India’s economy is expected to maintain strong momentum in FY2026-27, with real GDP growth projected at 6.9 per cent despite rising geopolitical tensions.

And uncertainty stemming from the ongoing conflict in West Asia, according to the Annual Report 2025-26 released by the Reserve Bank of India. The RBI said that while global risks remain elevated, the overall impact on India is likely to stay manageable due to the country’s strong domestic demand conditions and relatively lower dependence on exports. Private consumption and investment activity are expected to remain the key drivers of economic growth in the coming financial year.

The central bank also highlighted progress on the fiscal front, noting that the Centre successfully achieved its fiscal consolidation target. India’s fiscal deficit narrowed to 4.4 per cent of GDP in FY26, supported by robust direct tax collections and improved non-tax revenue generation.

On inflation, the RBI said headline inflation moderated sharply to 2.1 per cent in FY26 from 4.6 per cent in the previous year. The decline was mainly attributed to easing food prices and favourable base effects. With inflation staying comfortably within the target band, the Monetary Policy Committee reduced the repo rate by 100 basis points during the year to support economic activity.

In addition to rate cuts, the RBI injected liquidity through open market operations and reductions in the cash reserve ratio (CRR) to improve credit flow and strengthen monetary policy transmission.

However, the report cautioned that risks to the growth outlook remain tilted to the downside. The RBI warned that any prolonged escalation in West Asia could push up crude oil prices, disrupt supply chains, increase logistics costs, and revive inflationary pressures globally.

Even so, the central bank maintained that India remains relatively well-positioned to absorb external shocks because of resilient domestic consumption patterns and continued investment activity.