The Reserve Bank of India (RBI) has revised its macroeconomic projections by lowering the consumer price inflation (CPI) forecast for FY27 to 5 percent from the earlier estimate of 5.1 percent, while increasing the real GDP growth projection to 6.7 percent from 6.6 percent.

Announcing the outcome of the Monetary Policy Committee (MPC) meeting on August 5, RBI Governor Sanjay Malhotra said the recent rise in inflation was primarily driven by supply-side factors and was not broad-based. He added that core inflation remained moderate and was expected to ease after peaking during the third quarter of the financial year. Core inflation excluding precious metals continued to remain benign.

The central bank revised its quarterly inflation projections, reducing the estimate for the second quarter of FY27 to 4.7 percent from 5.1 percent. The third-quarter projection was retained at 5.9 percent, while the fourth-quarter estimate was marginally increased to 5.5 percent from 5.4 percent. The MPC noted that headline inflation remained above the desired level but was broadly in line with its expectations.

The committee decided to keep the policy repo rate unchanged at 5.25 percent and maintained its neutral monetary policy stance. The Standing Deposit Facility (SDF) rate remained at 5 percent, while the Marginal Standing Facility (MSF) rate and the Bank Rate were retained at 5.50 percent.

Governor Malhotra stated that liquidity conditions continued to remain comfortable, with the Liquidity Adjustment Facility (LAF) recording an average daily surplus of around Rs 1 lakh crore since the previous policy meeting.

On the growth front, the RBI raised its real GDP growth forecast for FY27 to 6.7 percent. The first-quarter growth estimate was increased to 7 percent from 6.6 percent, while projections for the third and fourth quarters were retained at 6.5 percent and 6.8 percent, respectively.

According to the RBI, high-frequency economic indicators suggest that domestic economic activity remained resilient during the first quarter. Early corporate earnings indicated healthy performance by manufacturing companies, while domestic demand continued to support overall economic growth.

Despite the improved growth outlook, the MPC cautioned that uncertainties remain due to the progress of the southwest monsoon and evolving geopolitical developments. The RBI also noted that while supply-side pressures arising from the West Asia conflict had moderated, renewed escalation could increase volatility in global energy prices. In addition, Governor Malhotra highlighted that El Niño conditions have increased uncertainty surrounding the agricultural sector, posing a potential risk to the inflation outlook.