India's Economy To Grow 6.9% For 2026-27 Despite Geopolitical Headwinds, Says RBI Annual Report

RBI GDP Growth: India’s real GDP growth is projected to remain at 6.9 per cent for FY2026-27 as the adverse impact of West Asia will remain contained, according to RBI’s Annual Report 2025-26.

RBI adds that risks are tilted to the downside due to global uncertainties and the West Asia conflict, with strong domestic consumption and investment remaining the main growth drivers.

RBI in the annual report says that the centre achieved its fiscal consolidation target, with the fiscal deficit falling to 4.4% of GDP in FY26. Revenue growth was driven by higher direct tax collections and non-tax revenues, it added.

Inflation Moderates, Policy Support Continues

Headline inflation eased sharply to 2.1 per cent in FY26 from 4.6 per cent a year earlier, largely due to lower food inflation and favourable

base effects. With inflation remaining well within the target range, the Monetary Policy Committee reduced the repo rate by 100 basis points during the year.

The RBI also infused liquidity through open market operations and CRR cuts to support growth and ensure smooth transmission of monetary policy.

Risks From West Asia Conflict

Despite the positive outlook, the RBI cautioned that risks to growth remain tilted to the downside. The central bank highlighted that a prolonged conflict in West Asia could lead to higher crude oil prices, increased logistics costs, and renewed inflationary pressures.

However, it said India’s relatively lower dependence on exports and strong domestic demand should help cushion the economy against external shocks.