RBI Raises Near-Term GDP Forecasts, Defers Full-Year Outlook to April

Taking into account various domestic and global factors, the RBI has revised the real GDP growth projection for the first quarter (Q1) of FY27 to 6.9 per cent and for the second quarter (Q2) to 7 per cent.

The Governor said that the risks to the growth outlook are evenly balanced. However, projections for the full financial year have been deferred, as the new GDP series is scheduled to be released later in the month and will be incorporated in the April policy.

He said "Real GDP growth projections for Q1 and Q2 of next year, that is 2026-27, are revised upward slightly to 6.9 per cent and 7 per cent respectively......I mentioned that we are deferring the projections for the full year to the April policy as the new GDP series will be released later in the month".

In the last December policy meeting, the RBI had projected GDP growth for Q1 and Q2 of 2026-27 at 6.7 per cent and 6.8 per cent, respectively, indicating a marginal upward revision in the latest assessment.

The Governor said the Indian economy continues on a steady improving trajectory, with real GDP poised to register a significantly higher growth of 7.4 per cent in the current year compared to the previous year.

On the external front, the Governor mentioned that the recently concluded India-EU free trade agreement and the prospective India-US trade deal, along with other trade agreements, are expected to support exports over the medium term.

Despite global headwinds, growth has been supported by private consumption and fixed investment. However, net external demand remained a drag on growth, with imports outpacing exports.

On the supply side, real Gross Value Added (GVA) growth is estimated at 7.3 per cent during the year, driven by a strong contribution from the services sector and a revival in manufacturing activity.

Looking ahead, the Governor noted that economic activity is expected to hold up well in the next year. Agricultural activity is likely to be supported by healthy reservoir levels, robust rabi sowing, and improvement in crop vegetation conditions.

He also shared that the improving performance of the corporate sector and sustained momentum in the informal sector are expected to boost manufacturing activity, while construction sector growth is projected to remain firm. The services sector is expected to stay resilient, supported by strengthening domestic demand.

The governor also added that preliminary results from high-tech firms indicate an improvement in business activity. On the demand side, private consumption momentum is expected to sustain next year.

Rural demand remains steady, aided by improving agricultural activity and better rural labour market conditions. Urban consumption is also expected to strengthen further, with continued support from GST rationalisation and monetary easing.

Investment activity is expected to receive a boost from high capacity utilisation, accelerating bank credit, conducive financial conditions, and the government's continued emphasis on infrastructure. Several measures announced in the Budget are also expected to support growth.

Taking all these factors into consideration, the RBI revised the near-term growth outlook upward, while deferring the full-year FY27 projection to the April policy.

- ANI