RBI Raises Near-Term GDP Projections for FY27, Defers Annual Forecast

The Reserve Bank of India (RBI) has revised its growth projections for the first two quarters of the financial year 2026–27, indicating a more optimistic outlook for the Indian economy. Governor Sanjay Malhotra announced on February 6, 2026, that the real GDP growth forecast for the first quarter (Q1) has been adjusted to 6.9 percent, while the second quarter (Q2) is now projected at 7 percent. However, the RBI has decided to defer its full-year growth forecast until its April policy meeting.

The decision to postpone the full-year GDP projections comes as the RBI awaits the release of new GDP data later this month. Governor Malhotra noted, “Real GDP growth projections for Q1 and Q2 of next year, that is 2026–27, are revised upward slightly to 6.9 percent and 7 percent respectively… I mentioned that we are deferring the projections for the full year to the April policy as the new GDP series will be released later in the month.”

Comparing this announcement to the previous December policy meeting, the RBI had forecasted GDP growth of 6.7 percent for Q1 and 6.8 percent for Q2 of FY27, signaling a modest increase in the latest evaluation.

Despite the uncertainty surrounding full-year projections, the current fiscal year remains strong, with the RBI estimating a real GDP growth of 7.4 percent, a significant increase from the previous year. The Governor emphasized that the Indian economy continues to show resilience, driven by factors including robust private consumption and fixed investment.

On the external trade front, the recent India–EU free trade agreement and potential trade deals with the United States are expected to bolster exports in the medium term. Despite challenges from global economic conditions, domestic consumption has remained a strong driver of growth, although net external demand has faced pressures as imports have outpaced exports.

In discussing supply-side trends, the RBI estimates real Gross Value Added (GVA) growth at 7.3 percent for the year. This growth is primarily attributed to a strong performance in the services sector, alongside a resurgence in manufacturing activity.

Looking ahead, the RBI’s outlook for the coming year remains positive. Agricultural activity is expected to benefit from healthy reservoir levels and strong rabi sowing, which should enhance crop conditions. The corporate sector’s performance is also anticipated to improve, contributing to sustained growth in manufacturing. The construction sector is projected to maintain its momentum, while the services sector is likely to thrive, bolstered by increasing domestic demand.

Preliminary data from high-tech firms suggest that business activity is improving, which should support the ongoing momentum in private consumption. Rural demand is stabilizing due to favorable agricultural conditions, while urban consumption is expected to strengthen further, aided by the Goods and Services Tax (GST) rationalization and monetary easing initiatives.

Investment activity is likely to see an uptick, driven by high capacity utilization, accelerating bank credit, and favorable financial conditions. The government’s ongoing commitment to infrastructure development, alongside measures announced in the recent budget, is expected to further invigorate investment.

In summary, the RBI’s revised near-term growth outlook reflects an optimistic view of the Indian economy, while the decision to defer the full-year forecast underscores the importance of forthcoming economic data. The central bank’s assessment suggests a balanced risk profile for growth, indicating confidence in the resilience of the Indian economy moving forward.