RBI MPC raises FY26 GDP forecast marginally to 7.4% in February policy outcome

RBI MPC Decision: The Reserve Bank of India (RBI) on Friday revised its growth outlook for FY2025–26 to 7.4% from 7.3% earlier, as the central bank reassessed economic momentum in light of trade deals and strong domestic demand during the February monetary policy meeting.

The projection was higher than the growth forecast of 6.8% -7.2% pegged by the Economic Survey last week.

For the first half of the upcoming financial year, the RBI MPC expects GDP growth to remain robust as it revised its estimates upwards. For Q1 FY27, RBI MPC raised the GDP outlook to 6.9% from 6.7% earlier and for Q2 FY27 to 7% from 6.8% earlier, as the central bank remains confident of the Indian economy remaining insulated amid global growth worries.

“Amidst heightened geo-political tensions and elevated uncertainty, the Indian economy is in a good spot with strong growth and low inflation,” said RBI Governor Sanjay Malhotra.

The RBI also raised its initial projections for 2026–27, forecasting real GDP growth of 6.9% in the first quarter and 7.0% in the second, up from its earlier estimates of 6.7% and 6.8%, respectively.

RBI remains bullish on Indian economy

Malhotra observed that high-frequency indicators suggest continuation of the strong growth momentum in Q3:2025-26 and beyond. With the signing of a landmark trade deal with the European Union and the US trade agreement in sight, growth momentum is likely to be sustained for a longer period, the Governor said.

Going forward, the RBI Governor expects the economic growth to be supported by strong agricultural activity, improving corporate sector performance and sustained manufacturing activity.

Rural and urban demand should continue to improve amid improving rural labour market conditions and strong agricultural activity, supported by the GST rationalisation and easing policy rates.

"The recently concluded India-EU free trade agreement (FTA) and the prospective India-USA trade deal, along with several other trade agreements, will support exports over the medium-term," the Governor said in his speech.

He highlighted that he spillovers emanating from geopolitical tensions, volatility in international financial markets and shifting trade patterns pose risks to the outlook.

The central bank deferred the projections for the full year to the April policy as the new GDP series will be released later in the month.

RBI MPC keeps repo rate unchanged

Meanwhile, along expected lines, the RBI kept the key repo rate unchanged at 5.25% during the last MPC meeting outcome of the ongoing financial year. The RBI's six-member monetary policy committee voted unanimously to hold the repo rate.

The monetary policy stance was retained at "neutral", suggesting rates will stay low for some time to come.

The RBI MPC is slated to meet next from April 6 to April 8.