RBI Trims FY27 GDP Growth Forecast To 6.6%; Fuel Price Hike, El-Nino Concerns To Keep Inflation at 5.1%

RBI MPC Today: The Reserve Bank of India has downgraded its real Gross Domestic Product (GDP) forecast to 6.6% from 6.9%, announced RBI Governor Sanjay Malhotra on Friday, June 5. At the same time, the central bank raised its Consumer Price Index (CPI) inflation projection for FY27 to 5.1%, up from the earlier estimate of 4.6%, citing concerns over rising crude oil prices, the potential pass-through impact on petrol and diesel costs, and weather-related risks associated with a possible El Niño affecting the monsoon season.

The Reserve Bank of India's Monetary Policy Committee (MPC), on Friday, June 5, kept the repo rate unchanged at 5.25% in light of elevated energy prices, geopolitical tensions due to West Asia crisis, and global uncertainty. The central bank had also kept its stance as 'neutral'.

'The outlook also remained clouded due to monsoon forecast and El Niño', stated RBI Governor Sanjay Malhotra on Friday.

RBI MPC: Governor Sanjay Malhotra Releases GDP Forecasts

Quarter	GDP Growth Projection
Q1 FY27	6.6%
Q2 FY27	6.3%
Q3 FY27	6.5%
Q4 FY27	6.8%

A prolonged West Asia crisis poses a wider risk to both inflation and growth. Energy markets have been volatile, crude oil reserves are declining, and global commodity prices have also firmed up. Against this backdrop, the central bank opted for a more cautious stance, citing heightened uncertainty over the inflation and growth outlook.

"Global financial markets have shown mixed trends, with equities remaining buoyant, driven by AI optimism, while sovereign bond yields have hardened on fiscal sustainability concerns and inflation worries. The US dollar index has appreciated recently amid shifting rate expectations and changing risk sentiment," noted the RBI in its statement.

RBI MPC 2026 Inflation Forecast For FY 27

The global energy supply shock due to the Israel-US war on Iran and uncertainty over ceasefire is likely to keep inflation elevated in the coming months. "The partial pass-through of high global crude oil prices to domestic pump prices of petrol and diesel started since May.17 Prices of several inputs such as commercial LPG, industrial raw materials, chemicals, base metals, rubber, and plastic products, among others, have increased. 18 These could exert upward pressure on CPI inflation in the coming months as firms pass on higher input costs," said RBI Governor Malhotra in his RBI MPC speech today.

Quarter	CPI Inflation Projection
Q1 FY27	4.2%
Q2 FY27	5.1%
Q3 FY27	5.9%
Q4 FY27	5.4%
FY27 Full Year	5.1%

RBI MPC Policy April Meeting Recap

The Monetary Policy Committee of the Reserve Bank of India kept the repo rate unchanged at 5.25% while maintaining a neutral stance, Governor Sanjay Malhotra announced on Wednesday, April 8. This marks the second consecutive policy meeting with a status quo decision. However, the central bank has revised its real GDP growth projection for FY2026-27 upward.

The MPC meeting, which commenced on April 6 and concluded on April 8, unfolded amid escalating global tensions triggered by the Iran-US conflict, adding complexity to the RBI's policy outlook.