Key Points

Announcing the monetary policy on Wednesday, RBI Governor Sanjay Malhotra said that the central bank continues to see resilience in domestic activity, supported by favourable macroeconomic conditions.

"Prospects of external demand, however, remain uncertain amidst ongoing tariff announcements and trade negotiations. Taking all these factors into account, real GDP growth for 2025-26, the current year, is projected at 6.5 per cent, our earlier projection," the Governor said.

The RBI expects the domestic economy to be driven by an above-normal southwest monsoon, lower inflation, rising capacity utilization, and congenial financial conditions. These factors, the RBI noted, are providing a supportive backdrop for sustained economic activity.

Further, the central bank highlighted that supportive monetary, regulatory, and fiscal policies, including robust government capital expenditure, are likely to boost demand further.

It also pointed out that the services sector is expected to remain buoyant, backed by sustained growth in construction and trade segments.

Governor Malhotra stated "With sustained growth in construction and trade segments, the services sector is expected to remain buoyant in the coming months".

However, the central bank flagged several downside risks to the growth outlook as well. It warned that prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets continue to pose risks.

"Global uncertainties and volatility in global financial markets pose risks to the growth outlook," the RBI reiterated.

Breaking down the quarterly projections, the RBI forecast real GDP growth for Q1 of FY26 at 6.5 per cent, Q2 at 6.7 per cent, Q3 at 6.6 per cent, and Q4 at 6.3 per cent.

For the first quarter of the next financial year 2026-27, growth is projected at 6.6 per cent. The central bank said that the risks to the growth outlook are evenly balanced.

- ANI