Key Facts:
Gross domestic product (GDP) is a monetary measure of the total value of all goods and services produced in a country during a specific time period.
Reserve Bank of India, abbreviated as RBI, is the central bank of India, and regulatory body responsible for regulation of the Indian banking system and Indian currency.
Prime Highlights:
The RBI has revised India’s real GDP growth forecast for 2025-26 to 6.7%, driven by strong rabi crop prospects and an expected recovery in industrial activity.
CPI inflation is expected to moderate to 4.4% in Q4 of the current fiscal year and further decline to 4.2% in 2025-26, supported by favorable crop outcomes and easing food inflation.
Key Background:
In a recent announcement, the Reserve Bank of India (RBI) raised its real GDP growth forecast for 2025-26 to 6.7%, citing favorable rabi crop prospects and a projected recovery in industrial activity. The RBI’s optimistic outlook reflects expectations of robust agricultural output and continued growth in key sectors, which are anticipated to support overall economic expansion.
RBI Governor Sanjay Malhotra emphasized that household consumption would remain a key driver of growth, bolstered by tax relief measures introduced in the Union Budget for 2025-26. Additionally, he highlighted the expected recovery in fixed investment, supported by improved capacity utilization, strong balance sheets among financial institutions and corporates, and the government’s sustained focus on capital expenditure.
However, the RBI also acknowledged risks to growth, including global uncertainties and climate change, which may pose challenges to economic stability. Governor Malhotra pointed out that geopolitical tensions, slow disinflation, and continued volatility in global financial markets could impact the broader economic environment.
The RBI’s revised GDP growth forecast for 2025-26 includes quarterly projections: 6.7% for Q1, 7.0% for Q2, and 6.5% for both Q3 and Q4. The risks to the forecast are considered evenly balanced, reflecting a mix of positive domestic factors and global challenges.
In addition to the growth outlook, the RBI projected that Consumer Price Index (CPI) inflation would moderate to 4.4% in the final quarter of the current financial year and decline further to 4.2% in 2025-26. Malhotra attributed this to favorable agricultural production, including good kharif and rabi crop prospects, and a moderation in food prices. However, he cautioned that global financial market volatility and energy price fluctuations could present upside risks to inflation. Overall, the RBI’s projections signal cautious optimism for the Indian economy, with growth expected to remain resilient despite global headwinds.
