India’s economy is expected to remain resilient in FY27 despite the challenging global environment, rising crude oil prices, and increasing commodity prices triggered by the Iran-US conflict, the Reserve Bank of India (RBI) said in its annual report released on Friday.
The RBI projected India’s GDP growth at 6.9% and CPI inflation at 4.6% for FY27, while warning that global uncertainties continue to pose downside risk to growth.
Here are 5 key highlights from the report
1. India’s economy to remain resilient in FY27 despite India-US war
The RBI noted that the geopolitical risk on the back of adverse impact of the West Asia conflict, that broke out at the end of February 2026, has re-emerged as the dominant drag on global growth in 2026.
However, the central bank remained positive on India’s economic outlook.
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“Against the backdrop of moderate global growth, the outlook for the Indian economy in 2026-27 remains positive, supported by strong macroeconomic fundamentals, although a prolonged West Asia conflict may pose downside risks,” the RBI said in the report.
2. Trade agreements, strong bank balance sheets to support India growth
RBI highlighted that the implementation of various trade agreements with the key trading partners would provide further momentum to India’s growth.
Healthy balance sheets of the corporate and banking sectors, along with the government’s continued thrust on capital expenditure, bode well for India’s strong growth trajectory.
However, they noted that the lingering geopolitical tensions, supply chain disruption may pose near-term risks to corporate earnings and performance of loan portfolio.
3. $691 billion forex reserves to provide 11-month import cover: RBI
India’s foreign exchange reserves stood at $691.1 billion at the end of March 2026, providing an import cover of around 11 months.
The current account deficit (CAD) remained manageable at 1% of GDP during April-December 2025 despite a wider merchandise trade deficit.
The RBI said India’s external sector remained resilient even as foreign portfolio investments witnessed outflows during the year.
4. RBI sees stable inflation despite El Nino risks and global tensions
“While the ongoing geopolitical tensions are likely to exert pressure on the availability and prices of key inputs, particularly fertilisers, the government’s continued efforts in ensuring adequate availability of fertiliser and other key inputs through diversified sources and buffer management are expected to mitigate these potential concerns,” it said.
The report also said inflation in 2026-27 is likely to remain aligned with the target on the back of adequate foodgrain stocks, sufficient reservoir levels and stable agricultural prospects despite possible El Nino conditions and above-normal summer temperature.
The RBI MPC retained the inflation target at 4% with a tolerance band of +/- 2% for the next five years starting April 2026.
5. RBI flags El Nino risk to agriculture output in 2026-27
However, The RBI noted that the outlook for the agriculture sector in 2026-27 remains contingent upon the progress and distribution of the South-West monsoon.
“The likelihood of El Nino conditions poses downside risks to agricultural output,” it said. However, the rain-inducing positive Indian Ocean Dipole (IOD) conditions are likely to emerge towards the latter part of the monsoon season, which may partly offset adverse impacts.
India remains fastest-growing major economy in FY26: RBI
However, India remained the world’s fastest-growing major economy in FY26, with GDP growth estimated at 7.6%, up from 7.1% in FY25. The growth was supported by strong domestic consumption, sustained investments, government policy support and stable macroeconomic conditions.
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Retail inflation in FY26 also moderated sharply to 2.1% from 4.6% a year ago. The inflation excluding food and fuel remained largely benign because of GST rationalisation, which came into effect from September 22, soft global commodity prices and muted input cost pressures.
RBI also said that the Centre achieved its fiscal consolidation target by bringing the fiscal deficit down to 4.4% of GDP in FY26.
RBI MPC meet on June 5
The next RBI Monetary Policy Committee is expected to hold its bimonthly meeting on June 3-June 5.
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During FY26, The RBI had reduced the repo rate by 100 basis points.
Liquidity conditions remained in surplus during the year. The central bank injected durable liquidity through open market operations, CRR cuts and forex swap operations.
The weighted average call rate remained below the repo rate during the year, reflecting easy liquidity conditions.
TOPICSEl NinofertiliserRBIRBI Monetary Policy ReviewReserve Bank of India + 0 MoreThis article was first uploaded on May twenty-nine, twenty twenty-six, at twelve minutes past four in the afternoon.