Sanjay Malhotra, governor of the Reserve Bank of India (RBI), has noted that real economic activity in the country, driven by healthy consumption and investment demand and supported by conducive financial conditions and accommodative policies, remained robust in 2025-26. According to in minutes of the latest Monetary Policy Committee meeting, he opined that West Asia conflict poses challenges to the Indian economy through a number of channels - exports, supply of critical commodities, elevated energy and other commodity prices, remittances, uncertainty, subdued global demand, etc. Despite these challenges, the outlook for 2026-27 remains cautiously positive with services, agriculture, and healthy balance sheets continuing to support growth.
Private consumption and investment are expected to remain resilient, aided by improving rural demand, sustained public spending, and a pickup in private capex. Merchandise exports are likely to get affected by logistics disruptions, rising freight and insurance costs. On the other hand, despite subdued global demand, services exports and recent trade agreements are expected to provide support. While real GDP growth for 2026-27 is projected at 6.9 per cent, there are risks skewed to the downside from global and weather-related uncertainties.
In terms of the outlook for inflation, retail prices of petrol and diesel have remained unchanged so far and the near-term outlook for food prices remains favourable. While CPI inflation for 2026-27 is projected at 4.6 per cent, escalating global energy prices, elevated input costs and the possible emergence of El Niño conditions pose upside risks. RBI Governor noted that overall, geopolitical uncertainties have intensified with the conflict widening its spread over the last month. As a result, supply chain disruptions, that may take longer to subside fully and restore the logistics network, pose downside risks to growth and upside risks to inflation. Nevertheless, the Indian economy is on a much stronger footing at the current juncture than at any time before to withstand these shocks.