RBI Lowers GDP Growth Forecast To 6.5 Pc For 2025-26 As Global Uncertainties Spike

(MENAFN- IANS) Mumbai, April 9 (IANS) The RBI's monetary policy committee has reduced its projection for India's GDP growth in 2025-26 by 20 basis points to 6.5 per cent from 6.7 per cent due to global trade and policy uncertainties in the wake of the US tariff hikes, Reserve Bank of India Governor Sanjay Malhotra said on Wednesday.

The RBI Governor said,“First and foremost, uncertainty in itself dampens growth by affecting investment and spending decisions of businesses and households. Second, the dent in global growth due to trade frictions will impede domestic growth. Third, higher tariffs will have a negative impact on net exports.”

“However, there are several known unknowns - the impact of relative tariffs, the elasticities of our export and import demand, and the policy measures adopted by the government, including the proposed Foreign Trade Agreement with the US,” he said.

This makes the exact quantification of the adverse impact difficult, he pointed out.

Taking all these factors into consideration, real GDP growth for 2025-26 is now projected at 6.5 per cent, with Q1 at 6.5 per cent; Q2 at 6.7 per cent; Q3 at 6.6 per cent; and Q4 at 6.3 per cent, the RBI Governor said.

He said that while the risks are evenly balanced around these baseline projections, uncertainties remain high in the wake of the recent spike in global volatility.

India's real GDP is estimated to grow at 6.5 per cent in 2024-25 on top of a 9.2 per cent growth rate observed in the previous year. In 2025-26, prospects for the agriculture sector remain bright on the back of healthy reservoir levels and robust crop production, Malhotra pointed out.

He said that manufacturing activity was showing signs of revival with business expectations remaining robust, while services sector activity continues to be resilient.

On the demand side, bright prospects of the agriculture sector bode well for rural demand which continues to be healthy, while urban consumption is gradually picking up with an uptick in discretionary spending.

Investment activity has gained traction and it is expected to improve further on the back of sustained higher capacity utilisation, government's continued thrust on infrastructure spending, healthy balance sheets of banks and corporates, along with the easing of financial conditions. Merchandise exports will be weighed down by global uncertainties, while services exports are expected to remain resilient. Headwinds from global trade disruptions continue to pose downward risks, Malhotra added.

MENAFN09042025000231011071ID1109407007