NEW DELHI: Despite uncertainty around global trade due to high tariffs announced by the US, the Reserve Bank of India has maintained India’s FY26 GDP growth target at 6.5% even as it cuts the inflation target from 3.7% to 3.1%.
In the monetary policy statement on Wednesday, the Central Bank said the above normal southwest monsoon, lower inflation, rising capacity utilisation and congenial financial conditions continue to support domestic economic activity.
“The supportive monetary, regulatory and fiscal policies including robust government capital expenditure should also boost demand,” it said.
According to the RBI, the services sector is expected to remain buoyant, with sustained growth in construction and trade in the coming months. It, however, warned that the prospect of external demand remains uncertain amidst ongoing tariff announcements and trade negotiations.
“The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook,” it said. The Central Bank projects the GDP to grow at 6.7% in Q2, 6.6% in Q3, and at 6.3% in Q4.
As for CPI headline inflation, the banking regulator said large favourable base effects combined with steady progress of the southwest monsoon, healthy kharif sowing, adequate reservoir levels and comfortable buffer stocks of food grains have contributed to the moderation in inflation.
However, it says the CPI inflation is likely to edge up above 4% by fourth quarter of FY26 and beyond, as unfavourable base effects, and demand side factors from policy actions come into play.