RBI cuts FY27 GDP growth forecast to 6.6% from 6.9% amid West Asia conflict
Mumbai, June 5
Reserve Bank of India Governor Sanjay Malhotra on Friday revised downward India's GDP growth forecast for the current financial year FY27 to 6.6 per cent from the 6.9 per cent projected in the April monetary policy review, citing heightened global uncertainty arising from the ongoing conflict in West Asia.
Announcing the outcome of the Monetary Policy Committee (MPC) meeting, the Governor said the evolving geopolitical situation, disruptions in global supply chains, volatility in financial markets and weather-related risks have increased downside risks to the domestic growth outlook.
"Real GDP growth for this year is now projected at 6.6 per cent. You know we projected 6.9 per cent. Of course, there is huge uncertainty and downside risk. The Q1 is now projected at 6.6 per cent, Q2 at 6.3 per cent, Q3 at 6.5 per cent and Q4 at 6.8 per cent. Prolonged global supply chain disruptions, volatility in global financial markets, and weather-related shocks continue to pose downside risks to the domestic growth outlook," the Governor said.
He noted that rising energy prices and disruptions in the supply of key commodities are likely to weigh on economic activity going forward.
In its April policy review, the RBI had projected India's GDP growth at 6.9 per cent for FY27 and estimated FY26 growth at 7.6 per cent.
According to the Governor, import diversification into affected commodities may help improve supplies, but it will come at a higher cost.
He added that the overall impact on the economy will depend on the duration of the conflict, the pace of normalization in global supply chains and the burden-sharing approach adopted by stakeholders.
The Governor also pointed out that the pass-through of higher energy prices to retail products is becoming visible. In addition, a projected deficiency in the southwest monsoon could have implications for agricultural production and rural demand.
"The rise in prices of energy and other inputs, coupled with supply disruption, is likely to weigh on economic activity. While import diversification into affected commodities is likely to improve supply, it will still come at a higher cost," he said.
Despite the challenges, the RBI Governor expressed confidence that measures taken by the government would help the economy cope with external shocks.
He said several initiatives undertaken by the government, including support to MSMEs and export sectors, efforts to ramp up domestic gas and food production, encouraging the use of domestically produced alternatives to imported inputs and diversification of critical imports, are expected to provide support to the economy.
— ANI
Reader Comments
I'm not surprised honestly. Look at what's happening in West Asia - it's affecting everyone. But 6.6% growth is still decent compared to other countries. We're in a better position than most. Just hope the monsoon deficiency doesn't hit our farmers hard. Kharif season is crucial.
This is what happens when you have a global crisis. But let's not panic - India has shown resilience before. The RBI governor is being realistic. I appreciate the transparency about downside risks. What worries me more is the pass-through of energy prices to common man. Petrol and diesel already burning a hole in our pockets 🛢️
I wish the article would explain how this affects the average Indian. The GDP numbers are abstract for most people. Will this mean higher inflation? Will EMIs go up? That's what we really need to know. The mention of weather-related risks is important - our agriculture is still too dependent on monsoon.
Honestly, these projections change every quarter. Last year it was 7.6%, now 6.6%. What's the point? The government should focus on ground-level economic issues - unemployment, rural distress, and inflation. GDP is fine but does it reflect in our daily lives? That's the real question.
I have to say, at least the RBI is being honest. They didn't sugarcoat the risks. And I'm glad they mentioned MSME support - that's where most jobs are. But we need more concrete steps, not just plans. The West Asia situation is worrisome but we've survived worse. Stay strong India 🇮🇳