NEW DELHI: The Reserve Bank of India (RBI) on Friday lowered its inflation forecast for 2025-26 to 3.7%, down from 4% projected earlier, citing broad-based moderation in price pressures and expectations of a good monsoon. It retained its GDP growth forecast at 6.5%, underpinned by resilient domestic demand and investment revival.
Announcing the outcome of the Monetary Policy Committee’s 55th meeting, RBI Governor Sanjay Malhotra said: “Inflation has softened significantly, from being above the tolerance band in October 2024 to 3.2% in April 2025. This gives us confidence of a durable alignment of headline inflation with the 4% target, and possibly an undershoot at the margin.”
The quarterly breakdown of the RBI’s inflation forecast now stands at 2.9% in Q1, 3.4% in Q2, 3.9% in Q3, and 4.4% in Q4. Risks are seen to be evenly balanced, though the central bank remains watchful of weather and global tariff-related uncertainties.
On growth, Malhotra noted that agriculture was benefiting from robust harvests and healthy reservoir levels, while services remained strong and industrial recovery was gradually firming up. “Private consumption and investment are holding up well, aided by stable macroeconomic fundamentals, healthy corporate and bank balance sheets, and sustained capex push from the government,” he said.
Addressing a common policy dilemma, the Governor rejected the notion that there is a conflict between price stability and growth. “There is no tussle between price stability and growth in the medium and long term. Price stability preserves purchasing power, supports investment decisions, and fosters equitable growth. It is a necessary precondition for sustainable development,” Malhotra said.
With inflation moderating and growth below aspirational levels, the RBI sees room to support the economy while remaining committed to its inflation target.