RBI Cuts FY27 Real GDP Forecast to 6.6% from 6.9%

Mumbai, June 5: The Reserve Bank of India (RBI) on Friday revised downward its real GDP growth forecast for FY27 to 6.6 per cent from 6.9 per cent projected earlier, signalling a more cautious growth outlook even as the central bank kept its key policy rates unchanged, citing the ongoing West Asia conflict and its spillover effects on India’s macroeconomic environment as key risk factors.

The revision underscores the RBI’s acknowledgement that global headwinds — particularly from the US-Iran war and the resulting disruption to energy supply chains — are beginning to leave their mark on India’s near-term growth trajectory, a concern that RBI Governor Sanjay Malhotra articulated explicitly when he noted that the global economic outlook remains clouded by the unfolding conflict in West Asia.

The Monetary Policy Committee (MPC), which met between June 3 and 5, voted to hold the repo rate steady at 5.25 per cent, maintaining its ‘neutral’ policy stance. The standing deposit facility (SDF) rate was retained at 5.00 per cent, while the marginal standing facility (MSF) rate and the bank rate were both kept at 5.50 per cent. The unanimous decision to pause reflects the committee’s balancing act between supporting growth momentum and managing inflationary pressures that are expected to rise through the middle quarters of FY27.

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Growth and Inflation Projections

On the growth front, the RBI’s quarterly projections show a front-loaded pace of 6.6 per cent in Q1 FY27, softening to 6.3 per cent in Q2 before recovering to 6.5 per cent in Q3 and firming up to 6.8 per cent in Q4, painting a picture of a growth trajectory that dips mid-year before regaining momentum. On inflation, the RBI projected CPI inflation for FY27 at 5.1 per cent, with the quarterly path showing a relatively benign 4.2 per cent in Q1 FY27, rising to 5.1 per cent in Q2, peaking at 5.9 per cent in Q3, and easing to 5.4 per cent in Q4 — a trajectory that reflects the seasonal pressures of the kharif harvest cycle and the lagged pass-through of elevated global energy prices.

The GDP forecast cut, the second downward revision in as many quarters, is a direct acknowledgement that the West Asia conflict has injected material uncertainty into India’s economic outlook, with crude oil prices remaining elevated above $90 per barrel and the Strait of Hormuz — through which a significant share of India’s oil imports transit — continuing to face operational constraints. While India’s domestic consumption demand and government capital expenditure remain resilient pillars of growth, the RBI appears to be signalling that external risks now constitute a meaningful drag on the headline growth number for FY27.

Source: Reserve Bank of India (rbi.org.in)