New Delhi, Wednesday: Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday cautioned that tariff-related developments could moderate India’s growth momentum in the second half of the fiscal year. However, he emphasized that the recently announced GST streamlining and other policy reforms by Prime Minister Narendra Modi would help cushion the economy against external headwinds.
Announcing the RBI’s fourth bi-monthly policy review for FY26, Malhotra revealed that the central bank has revised its GDP growth forecast upward to 6.8%, compared with the earlier estimate of 6.5%.
“The outlook for economic growth remains resilient, supported by a favourable monsoon, lower inflation, and monetary easing. Domestic activities have sustained momentum into the second quarter of this fiscal,” Malhotra said.
He added that structural reforms, particularly the rationalisation of GST, would counter some of the negative effects of tariff pressures.
External Sector and Forex Reserves
Malhotra highlighted the strength of India’s external sector, noting that software and services exports remain robust. He said India is well positioned to meet external obligations, with foreign exchange reserves standing at $700.2 billion — sufficient to cover 11 months of imports. Strong remittance inflows, he added, will help keep the current account deficit at sustainable levels through the fiscal year.
Inflation Outlook
The governor underlined that India’s inflation trajectory continues to support growth. The RBI now projects inflation at 2.6% for FY26, lower than its earlier forecast of 3.1%.
“An above-normal monsoon, healthy progress in kharif sowing, and comfortable reservoir levels have brightened the outlook for agriculture and rural demand,” Malhotra noted. “Alongside, buoyancy in the services sector, steady employment conditions, and GST reforms are expected to further boost demand. Rising capacity utilisation, favourable financial conditions, and strengthening domestic demand should continue to drive fixed investment.”
Monetary Policy Stance
The RBI’s Monetary Policy Committee (MPC) voted unanimously to keep the key repo rate unchanged at 5.5%, while maintaining its ‘neutral’ policy stance.
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