The RBI outlined multiple risks, including elevated crude oil prices fuelling imported inflation and widening the current account deficit, as well as disruptions in energy, fertilisers and commodity markets affecting output across industry, agriculture and services. Heightened global uncertainty and financial market volatility could also dampen consumption, investment and liquidity conditions, while weaker global growth may reduce export demand and remittance flows. The central bank cautioned that prolonged supply disruptions could eventually turn into a broader demand shock.
India’s economy remains resilient despite rising risks from West Asia tensions, according to the Reserve Bank of India’s April 2026 Bulletin.
GDP is estimated to grow 6.9 per cent in 2026-27, supported by strong domestic demand.
However, elevated oil prices, global uncertainty and financial volatility continue to pose downside risks overall.
Despite these challenges, domestic economic activity showed resilience in 2025-26, with real GDP growth estimated at 7.6 per cent, supported by strong consumption and investment, structural reforms and favourable financial conditions. Business sentiment remains optimistic, with leading indicators pointing to continued strength in manufacturing and services.
Looking ahead, GDP growth for 2026-27 is projected at 6.9 per cent, with quarterly estimates at 6.8 per cent in Q1, 6.7 per cent in Q2, 7.0 per cent in Q3 and 7.2 per cent in Q4. However, risks from geopolitical tensions, financial volatility and weather-related disruptions could weigh on the outlook.
On the demand side, private consumption is expected to remain strong, supported by discretionary spending, robust rural demand and improving urban consumption aided by GST rationalisation and a buoyant services sector. Continued infrastructure spending and rising private investment, driven by high-capacity utilisation and strong credit growth, are also expected to support growth.
Externally, merchandise exports may face pressure due to shipping disruptions, rising freight and insurance costs and weak global demand, although recent trade agreements could offer support. India’s foreign exchange reserves stood at $697.1 billion as of April 3, 2026.
Inflation remains a concern, with CPI inflation projected at 4.6 per cent for 2026-27, while core inflation is estimated at 4.4 per cent. Fuel and food prices drove a marginal increase in inflation in March, although money market conditions and bond yields eased following a temporary ceasefire in West Asia.
On the external financing front, gross foreign direct investment (FDI) remained strong, with net FDI turning positive, while foreign portfolio investment (FPI) flows stayed volatile, recording net outflows of $16.5 billion in 2025-26 and $5.4 billion so far in 2026-27. External commercial borrowings and non-resident deposits moderated compared to the previous year.
The RBI noted that sustained momentum in services, improved manufacturing capacity utilisation, and healthy corporate and financial sector balance sheets should continue to support domestic demand, even as global headwinds persist.
Fibre2Fashion News Desk (CG)
