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Reserve Bank of India (RBI) Governor Sanjay Malhotra has stated in today’s monetary policy document that domestic private consumption in 2026–27 is expected to be supported by discretionary spending. Rural demand remains robust. It should gain further traction on the back of favourable agricultural conditions and a healthy labour market. Urban consumption is likely to strengthen further, aided by the beneficial impact of GST rationalisation and buoyant services sector activity. While the government’s thrust on infrastructure spending continues, the revival in private sector investment is expected to sustain on the back of high-capacity utilisation, strong credit growth and benign financial conditions. On the external front, merchandise exports could be adversely impacted from disruptions to key shipping routes, the concomitant rise in freight and insurance costs and lower global demand on account of the conflict. However, merchandise exports may benefit from the recent trade agreements, while services exports are expected to remain resilient. Taking all these factors into consideration, real GDP growth for 2026-27 is projected at 6.9 per cent, with Q1 at 6.8 per cent; Q2 at 6.7 per cent; Q3 at 7.0 per cent; and Q4 at 7.2 per cent. Further escalation and wider spread of the conflict, heightened volatility in global financial markets and weather-related events, however, weigh on the domestic growth outlook.
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