RBI raises FY2026-27 growth forecast to 7.1%, hikes benchmark rate to 5.5%

[New Delhi, India — Pragya Awasthi, correspondent] The Reserve Bank of India (RBI) raised its forecast for India’s real GDP growth in FY2026-27 by 0.4 percentage points, from 6.7% to 7.1%, reflecting a recovery in domestic consumption and investment. At the same time, citing inflationary pressures and rising international commodity prices, it raised the repo rate, its policy rate, by 0.25 percentage points, from 5.25% to 5.5%.
At a Monetary Policy Committee meeting held on the 7th, the RBI assessed that domestic economic activity remained on a solid footing, with consumption and investment supporting growth, and made the decisions accordingly.
The RBI noted, however, that global trade uncertainty, geopolitical tensions, high commodity prices and deteriorating weather conditions could weigh on future growth. This latest upward revision follows an adjustment to the forecast in August. At the time, the RBI raised its FY2026-27 growth forecast by 0.1 percentage points, from 6.6% to 6.7%.
The significantly higher growth forecast reflects stronger-than-expected economic growth. The Indian economy grew 7.8% year on year in April-June, the first quarter of FY2026-27. This exceeded market expectations, and major global economic institutions subsequently raised their forecasts for India’s growth in turn. The RBI also forecast growth of 7.2% in the second quarter, 6.9% in the third quarter and 6.8% in the fourth quarter of FY2026-27. It then projected growth of 7.1% in the first quarter of FY2027-28.
RBI Governor Sanjay Malhotra said the 0.4-percentage-point increase in the annual growth forecast showed that Indian economic activity was demonstrating strong resilience despite significant external headwinds.
The World Bank recently raised its forecast for India’s growth in FY2026-27 from 6.6% to 7.1%. The Organisation for Economic Co-operation and Development (OECD) also forecast growth of 7.1%. S&P Global Ratings, the Asian Development Bank and Moody’s expect growth of around 7%. Fitch gave a relatively conservative forecast of 6.9%.
The Indian economy continues to grow, supported by robust domestic demand, consumption and investment, while manufacturing and services also remain in expansion. Recent economic indicators confirm this trend, and growth in exports of goods and services is also providing support. However, volatility in energy prices stemming from international oil prices, supply-chain instability and geopolitical conflict in West Asia is seen as a key risk factor.
The RBI expects services exports to remain robust in the period ahead. A recently concluded bilateral trade agreement is also expected to help boost goods exports. Taking these factors together, the RBI projected real GDP growth of 7.1% for FY2026-27 and assessed that the risks to the growth outlook were broadly balanced.

[email protected] Pragya Awasthi, Correspondent Reporter