New Delhi, October 2026 : Global economic uncertainty is expected to have some impact on domestic economic activity, although the Indian economy continues to demonstrate resilience, the Reserve Bank of India (RBI) said on Wednesday. The central bank cautioned that energy prices and supply chain pressures remain concerns, with their near-term trajectory uncertain amid the continuing conflict in West Asia.
Releasing the minutes of the Monetary Policy Committee (MPC) meeting held from October 5 to 7, the RBI said the adverse impact of global disruptions was being contained through the active diversification of supply sources.
The central bank also flagged risks to the agricultural sector and rural demand from a deficient southwest monsoon and strong El Niño conditions. However, it said adequate foodgrain stocks and proactive government interventions were expected to cushion the impact.
Continuing momentum in the services sector and broadly stable employment conditions are likely to support urban consumption, according to the MPC minutes. On the investment front, strong capacity utilisation, robust credit flows and the government's emphasis on infrastructure development are expected to sustain economic activity.
The RBI noted that services exports were likely to remain strong, while bilateral trade agreements could provide a boost to merchandise exports, supporting the broader economic outlook.
Growth Projection Raised to 7.1 Per Cent
RBI Governor Sanjay Malhotra said India had demonstrated remarkable resilience despite the turbulent global economic environment.
The central bank has projected India's economic growth at 7.1 per cent for the financial year 2026-27, an increase of 40 basis points from the earlier estimate of 6.7 per cent announced in August.
However, Malhotra cautioned that inflationary pressures were building. Headline consumer price index (CPI) inflation is projected to reach the upper tolerance band in the third quarter and remain significantly above 5 per cent over the following two quarters.
While the RBI said there was limited evidence of demand-driven inflationary pressures, it highlighted potential risks arising from strong growth in monetary and credit aggregates. These developments could influence the inflation outlook and require close monitoring.
MPC Signals Calibrated Tightening
Taking into account the growth outlook, inflationary risks and global uncertainties, the MPC unanimously voted to raise the policy repo rate by 25 basis points to 5.50 per cent. The committee also changed its monetary policy stance to calibrated tightening.
The revised stance signals that interest rate cuts are unlikely in the near term under prevailing conditions. Future policy decisions could involve either a further rate increase or a pause, depending on how economic conditions and the inflation outlook evolve.
According to the RBI, the duration and extent of any rate-hiking cycle will depend on actual growth and inflation trends, particularly the trajectory of underlying inflation.
The MPC will also assess whether price pressures are spreading across sectors, the possibility of second-round effects from supply-side shocks and the influence of demand conditions on inflation.
The central bank indicated that developments in global energy markets, supply chains and domestic agricultural output would remain important factors in determining the policy outlook.
While India's growth prospects remain encouraging, the RBI's assessment highlights the challenge of sustaining economic momentum while containing inflation. Policymakers will continue to monitor domestic and international developments before deciding on further monetary policy action.
