The RBI Governor, Sanjay Malhotra, expressed optimism about the recently concluded India-EU free trade agreement and the potential India-US trade deal. He highlighted that these agreements, along with others, are expected to bolster exports in the medium term. During the RBI MPC meeting, he emphasized the resilience of services exports and the importance of maintaining the key policy rate unchanged.
Malhotra also acknowledged potential risks to the economic outlook, citing spillovers from geopolitical tensions, financial market volatility, and evolving trade patterns. He noted that private consumption momentum is likely to continue in 2026-27, supported by steady rural demand and improvements in agricultural and rural labor market conditions. Urban consumption is expected to strengthen further, aided by GST rationalization, monetary easing, and conducive financial conditions.
Looking ahead, the RBI Governor anticipated a positive economic performance in 2026-27. Factors such as healthy reservoir levels, robust rabi sowing, and improved crop conditions are set to support agricultural activity. He highlighted that manufacturing activity is expected to receive a boost from improving corporate sector performance and sustained momentum in the informal sector. Additionally, the services sector is projected to remain resilient, driven by domestic demand and positive signals from IT firms.
Moreover, India’s economy is on a positive trajectory, with real GDP forecasted to grow significantly by 7.4% in 2025-26 compared to the previous year. Despite global challenges, growth was supported by private consumption and fixed investment. However, net external demand posed a challenge as imports surpassed exports. The real GVA growth, led by the services sector and a revival in manufacturing, is estimated at 7.3% in 2025-26.
