India Economy to Grow 6.9% in 2026-27 Despite Global Risks, Says RBI Report

The Indian economy is expected to remain resilient in 2026-27 despite a challenging global environment marked by high energy and commodity prices, rising logistics costs, volatile financial markets and ongoing trade uncertainty, said the Reserve Bank of India (RBI) in its Annual Report 2025-26 released on Friday (May 29, 2026).

“India’s economy is expected to remain resilient in 2026-27 despite global headwinds, supported by strong fundamentals, steady demand, lower export dependence and a stable policy environment,” said the RBI.

On the global front, RBI said geopolitical risks have become the biggest drag on growth in 2026. It highlighted that the West Asia conflict, which began in February 2026, has already weighed on global growth and inflation forecasts.

“In the IMF’s baseline scenario, the global economy is projected to grow by 3.1% in 2026, down from the earlier estimate of 3.3%, while global trade growth is expected to slow to 2.8%,” the report said. It warned that any escalation or spread of the conflict could further weaken the global outlook.

Geopolitical Risks Hit Growth

The central bank also flagged inflation risks, noting that global price pressures remain high due to rising energy costs and supply chain disruptions. “Global inflation is projected at 4.4% in 2026, higher than the earlier estimate of 3.8%,” it said. RBI added that financial markets may see higher volatility and possible corrections in equity markets if global conditions worsen.

Despite global uncertainty, RBI maintained a positive outlook for India. It said strong corporate and banking sector balance sheets, along with continued government capital expenditure, are supporting growth momentum.

RBI projected India’s real GDP growth at 6.9% for 2026-27, assuming the impact of the West Asia conflict remains contained. However, it said risks remain tilted to the downside due to global uncertainties.

India's Growth Resilient

RBI said inflation is likely to stay within target, supported by strong food stocks and stable farm output. But risks remain from higher global fuel prices, commodity shocks and currency volatility. CPI inflation for 2026–27 is projected at 4.6%, with risks slightly on the upside.

Farm output will depend on the monsoon, with El Niño posing a risk, though the Indian Ocean Dipole may offer some support later. Labour market conditions are also expected to improve with new labour codes, which could boost spending and productivity.

On external sector performance, RBI said services exports, remittances and trade agreements will support India’s current account balance. However, foreign portfolio investment flows will depend on global risk sentiment.

The banking system, RBI said, remains stable with adequate capital buffers, though global tensions and market volatility continue to pose short-term risks.