The Reserve Bank of India (RBI) has reduced the country’s economic growth rate (GDP Growth) estimates for the financial year 2026-27 (FY27). Earlier RBI had expected that the Indian economy would grow at the rate of 6.9 percent, but now this estimate has been reduced to 6.6 percent. Apart from this, RBI has estimated the retail inflation rate to be 5.1%.
RBI says that the ongoing conflict in West Asia, rising crude oil prices, supply chain disruptions and weather-related uncertainties are posing risks to the Indian economy. However, the central bank has maintained the repo rate at 5.25 percent only.
Announcing the decision of the Monetary Policy Committee (MPC), RBI Governor Sanjay Malhotra said that despite global challenges, the Indian economy remains strong so far. Private consumption, investment, manufacturing sector and service exports have supported the economy. According to the new estimate of RBI, GDP growth is expected to be 6.6 percent in the first quarter of FY27, 6.3 percent in the second quarter, 6.5 percent in the third quarter and 6.8 percent in the fourth quarter.
Weather also became a big concern
RBI has termed not only the global situation but also the weather as a big concern. The central bank said that conditions like below normal monsoon and El Nino can affect agricultural production. Monsoon plays a very important role in the economy of India. When there is good rain, farming improves, demand increases in rural areas and food inflation remains under control. At the same time, a weak monsoon can damage crops, due to which the prices of food items can increase. However, RBI says that there are sufficient food grains reserves in the country and sufficient water in the reservoirs, which can provide relief to some extent.
Crude oil becomes the biggest threat
Economists believe that the biggest risk facing India’s economy is the rise in crude oil prices. India imports more than 85 percent of its crude oil needs from abroad. In such a situation, the cost of oil in the international market has a direct impact on India.
RBI increased inflation estimate
Apart from this, RBI has increased the inflation estimate for the financial year 2026-27. The reason for this is the rise in retail inflation rate amid the sharp increase in food prices and ongoing tension in West Asia. In view of global uncertainties, RBI has estimated the Consumer Price Index (CPI) based inflation rate to be 5.1% for the financial year 2026-27. Earlier in the policy review released in April, the inflation rate was estimated to be 4.6%. That means the central bank has increased its inflation estimate by 0.5 percentage points.
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