New Delhi: The Reserve Bank on Friday lowered its GDP forecast for FY2026-27 to 6.6 percent from the 6.9 percent estimated in April, citing elevated energy and other commodity prices as well as continued supply disruptions arising from the conflict in West Asia, which are likely to weigh on economic activity.
Follow The PSUWatch Channel on WhatsApp
The central bank also said that prolonged global supply-chain disruptions, heightened volatility in global financial markets, and weather-related shocks continue to pose downside risks to the domestic growth outlook.
Announcing the June bi-monthly monetary policy, RBI Governor Sanjay Malhotra said several high-frequency indicators suggest that domestic economic activity has remained largely steady since the outbreak of the conflict.
India's manufacturing and services PMI suggest that both sectors continue to be resilient, and business expectations are still positive, he said.
On the demand side, private consumption has remained resilient so far. Fixed investment has also maintained its momentum despite rising cost pressures.
Merchandise exports recorded strong growth in April 2026, notwithstanding elevated freight and insurance costs.
Services exports are also holding up well, reflecting sustained demand despite concerns about AI.
Overall, the economic situation has broadly exhibited resilience and withstood the conflict spillovers, although the impact of rising cost pressures is becoming visible, Malhotra said.
"Going ahead, the rise in prices of energy and other inputs, coupled with supply disruptions, is likely to weigh on economic activity. While import diversification in affected commodities is likely to improve supply, it would come at a higher cost," he said.
The Governor further said that the full impact, however, will depend on the duration of the conflict, time taken for normalisation of supply chains and the burden-sharing approach among the stakeholders.
While weak global demand and high logistics costs are headwinds for merchandise exports, services exports are expected to sustain their momentum as demand for Indian services remains healthy, he added.
Follow PSU Watch on LinkedIN
"Taking all these factors into consideration, real GDP growth for 2026-27 is projected at 6.6 percent, with Q1 at 6.6 percent; Q2 at 6.3 percent; Q3 at 6.5 percent; and Q4 at 6.8 percent," Malhotra said.
On global economy, the Governor said the outlook remains clouded by the continuing geopolitical impasse in West Asia, as sharply escalating energy prices and global supply chain disruptions continue to hinder economic activity.
Risk-off sentiments and safe-haven demand are imparting volatility to forex markets, with a depreciating trend across many Emerging Market Economy (EME) currencies, he added.
(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated.)