Highlights:
• RBI says India’s growth outlook remains strong despite global uncertainties
• India recorded 7.6% GDP growth in FY2025-26
• West Asia conflict identified as a major global economic risk
• Healthy banking and corporate balance sheets to support growth
• RBI expects inflation to remain within target range
• El Nino conditions may impact agriculture and monsoon performance
• CBDC pilot programme to expand with new DBT use cases
• Government retains inflation target at 4% till 2031
Mumbai, May 29, 2026: The Reserve Bank of India (RBI) has said that India’s economy is expected to maintain strong growth momentum in the current financial year despite rising global uncertainties, including geopolitical tensions, energy price volatility, and supply chain disruptions.
In its Annual Report released on Friday, the central bank stated that strong macroeconomic fundamentals, healthy corporate and banking sector balance sheets, and the government’s continued focus on capital expenditure are likely to support India’s economic expansion.
The RBI noted that geopolitical tensions, particularly the ongoing conflict in West Asia, have emerged as a major risk to global growth and inflation in 2026. However, it maintained that India’s growth outlook for FY2026-27 remains encouraging.
“Despite moderate global growth conditions, the outlook for the Indian economy in 2026-27 remains encouraging due to strong macroeconomic fundamentals, though an extended conflict in West Asia could create downside risks,” the RBI said in the report.
India remained the world’s fastest-growing major economy in FY2025-26, recording a growth rate of 7.6 per cent compared to 7.1 per cent in the previous financial year. The growth was driven by robust domestic demand, sustained investments, stable macroeconomic conditions, and proactive policy support.
On the agriculture front, the RBI said the performance of the sector in 2026-27 would depend largely on the progress of the South-West monsoon. It cautioned that possible El Nino conditions may impact agricultural production, although positive Indian Ocean Dipole (IOD) conditions later in the season could help balance rainfall patterns.
The report also highlighted risks related to fertiliser availability and prices due to geopolitical tensions, but said government efforts involving diversified sourcing and buffer stock management are expected to minimise disruptions.
The central bank projected inflation to remain within the target range during FY2026-27, supported by adequate foodgrain stocks, healthy reservoir levels, and stable agricultural conditions. The government, in consultation with the RBI, has retained the inflation target at 4 per cent with a tolerance band of plus or minus 2 per cent till March 2031.
Additionally, the RBI announced plans to expand the Central Bank Digital Currency (CBDC) pilot programme by introducing new Direct Benefit Transfer (DBT) use cases and wider retail participation. The central bank is also exploring tokenisation-based financial pilots and broader ecosystem integration.
