India’s economic growth rate could get back to the 7%- plus range in FY27 if the West Asia peace endures and crude oil prices maintain the downward trajectory, Nagesh Kumar, external member of the RBI’s Monetary Policy Committee, has said, citing an improved macroeconomic outlook since the panel’s meeting on June 3-5.
Kumar said the outlook for the Indian economy has brightened following the easing of geopolitical tensions in West Asia and the subsequent decline in crude oil prices from around $110 a barrel to below $80.
“Assuming that the peace in West Asia is durable and crude prices continue to decline… one can expect that the Indian economy will have upside potential for the projected growth rates. I would expect it to go back to the 7%+ range,” Kumar said.
The RBI has projected real GDP growth at 6.6% for FY27. Kumar noted that the FY26 GDP growth came in at 7.7%, which is marginally higher than earlier expectations.
He also said the Centre’s fiscal consolidation — with the fiscal deficit declining from 6.5% of the GDP in FY23 to 4.4% in FY26 — would allow the government to sustain public investment and cushion any weakness in private consumption or investment arising from higher costs or supply-chain disruptions.
According to Kumar, recently signed free trade agreements with the European Union, the United Kingdom and other countries could also help offset weaker global demand by providing fresh opportunities for Indian exporters, particularly in labour-intensive sectors.
On inflation, Kumar said the decline in crude prices and measures announced by the Reserve Bank of India to attract foreign currency deposits, along with the government’s steps on taxation of investments in government securities, are expected to support the rupee and improve the inflation outlook.
“The 5.1% CPI headline was projected before the peace accord was signed and the exchange rate stabilisation measures were effected. Hence, the projections of CPI would be subject to downside potential,” he said.
However, he cautioned that food inflation risks remain due to the possibility of an El Niño-induced weak monsoon, although higher reservoir water levels and increasing resilience in Indian agriculture could mitigate the impact.
Kumar also stressed that the recent geopolitical developments reinforce the need for India to accelerate its clean energy transition, increase domestic energy exploration and expand strategic petroleum reserves to reduce vulnerability to oil price shocks.
TOPICSECONOMYGDPRBIThis article was first uploaded on June twenty-two, twenty twenty-six, at twenty minutes past ten in the night. © The Indian Express (P) Ltd