RBI Poised To Retain Fastest Growing Economy In FY26 Says RBI Annual Report
29 May 2025 8:39 PM IST29 May 2025 8:39 PM IST
RBI sees promising outlook for Indian economy in 2025–26, flags global risks
RBI (Image:DC)
Mumbai: The outlook for the Indian economy remains promising in 2025-26, supported by revival in consumption demand, government’s continued thrust on capex, healthy balance sheets of banks and corporates, easing financial conditions, continuing resilience of the services sector and strengthening of consumer and business optimism, besides sound macroeconomic fundamentals. However, uncertainty about global trade post-protectionist measures, protracted geopolitical tensions and global financial market volatility pose downside risks to the growth outlook and upside risks to the inflation outlook, said the RBI in its Annual Report 2024-2025 released on Thursday.
“Although real gross domestic product (GDP) growth moderated to 6.5 per cent in 2024-25, India remained the fastest growing major economy,” it said.
The central bank has warned that the country’s financial markets may exhibit sporadic episodes of volatility triggered by turbulent global financial markets in the wake of heightened uncertainty regarding the evolution of trade tariff policies, among others. Export sector is also expected to encounter some headwinds from rising geopolitical tensions, inward-looking policies and risk of potential tariff-war among major economies. However, India’s participation in 14 free trade agreements (FTAs) and six preferential trade agreements (PTAs), along with the new trade deals under negotiation with the US, Oman, Peru and the European Union (EU) may support growth in trade. Resilient services exports and inward remittances are likely to cushion current account deficit (CAD), which would remain eminently manageable in 2025-26.
For 2025-26, the Reserve Bank of India has projected real gross domestic product (GDP) growth at 6.5 per cent and consumer price index (CPI) inflation at 4 per cent.
Speaking about inflation, the RBI said, “The easing of supply chain pressures, softening of global commodity prices and higher
agricultural production on the back of a likely above-normal south-west monsoon augur well for the inflation outlook in 2025-26.”
The Annual Report also signaled the central bank’s tilt toward maintaining a growth-supportive approach, even as global uncertainties cloud the outlook. This comes just a week before the RBI’s Monetary Policy Committee will meet to decide on interest rates.
"A benign inflation outlook and moderate growth warrant monetary policy to be growth-supportive," the RBI said, adding that it will remain watchful of rapidly evolving global macroeconomic conditions as well as geopolitical developments.
The RBI’s monetary policy committee (MPC) started the rate cutting cycle in February this year, with 25 basis points cut to repo rate followed by a similar magnitude in April policy to support fragile economic growth and also changed its stance from neutral to accommodative. The repo rate now stands at 6 percent.
The RBI also said the central bank will continue to undertake liquidity management operations in sync with the monetary policy
stance to keep system liquidity adequate to meet the productive requirements of the economy.
For 2025-26, the Reserve Bank of India has projected real gross domestic product (GDP) growth at 6.5 per cent and consumer price index (CPI) inflation at 4 per cent.
Speaking about inflation, the RBI said, “The easing of supply chain pressures, softening of global commodity prices and higher
agricultural production on the back of a likely above-normal south-west monsoon augur well for the inflation outlook in 2025-26.”
The Annual Report also signaled the central bank’s tilt toward maintaining a growth-supportive approach, even as global uncertainties cloud the outlook. This comes just a week before the RBI’s Monetary Policy Committee will meet to decide on interest rates.
"A benign inflation outlook and moderate growth warrant monetary policy to be growth-supportive," the RBI said, adding that it will remain watchful of rapidly evolving global macroeconomic conditions as well as geopolitical developments.
The RBI’s monetary policy committee (MPC) started the rate cutting cycle in February this year, with 25 basis points cut to repo rate followed by a similar magnitude in April policy to support fragile economic growth and also changed its stance from neutral to accommodative. The repo rate now stands at 6 percent.
The RBI also said the central bank will continue to undertake liquidity management operations in sync with the monetary policy
stance to keep system liquidity adequate to meet the productive requirements of the economy.
( Source : Deccan Chronicle )
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