The Reserve Bank of India (RBI) has projected India’s economic growth at 6.9% for FY26-27 while cautioning that geopolitical tensions, elevated energy prices, global trade uncertainty and financial market volatility could weigh on the outlook in the coming months.
In its ‘Annual Report 2025-26’, the central bank said the domestic economy remains resilient due to strong macroeconomic fundamentals, robust domestic demand, healthy corporate and banking-sector balance sheets and continued government focus on capital expenditure (capex).
At the same time, the report highlighted a sharp increase in the value of banking fraud reported during the year. Banks and financial institutions reported 10,111 fraud cases involving ₹48,021 crore in FY25-26, compared with 23,722 cases involving ₹32,803 crore in FY24-25.
RBI said the outlook for the Indian economy remains positive despite an increasingly uncertain global environment shaped by the ongoing conflict in West Asia, rising commodity prices, supply-chain disruptions and trade policy uncertainties.
‘Growth prospects are supported by India’s strong macroeconomic fundamentals, including robust domestic demand, relatively lower dependence on exports as a growth driver and a stable policy environment,’ the report said.
The central bank projected consumer price inflation at 4.6% for FY26-27 while warning that risks remain tilted upward due to higher fuel and commodity prices, geopolitical tensions and exchange-rate volatility.
RBI noted that geopolitical risks have re-emerged as a major threat to global growth in 2026 following the escalation of conflict in West Asia earlier this year. It said the conflict could push up global inflation through higher energy prices and disruptions in shipping and supply chains.
According to the report, the International Monetary Fund (IMF) has lowered its global growth projection for 2026 to 3.1% from 3.3% estimated earlier, while global trade growth is expected to slow to 2.8%.
RBI also cautioned that global financial markets could witness heightened volatility amid tighter macroeconomic conditions and risk-off investor sentiment. Elevated valuations in technology stocks could face reassessment, increasing the possibility of corrections in equity markets, it said.
Despite external pressures, RBI said India remained the world’s fastest-growing major economy during FY25-26, with GDP growth accelerating to 7.6% from 7.1% a year earlier. Strong private consumption, sustained investments and sound macroeconomic fundamentals supported the expansion.
The report said headline retail inflation moderated sharply to 2.1% in FY25-26 from 4.6% in the previous year, mainly due to softer food prices and favourable base effects.
During the year, the monetary policy committee (MPC) reduced the repo rate by 100 basis points as inflation eased and liquidity conditions improved.
RBI also highlighted continued strength in the banking sector. Bank credit growth accelerated to 15.9% in FY25-26 from 10.9% a year earlier, while gross non-performing assets declined to multi-decadal lows. Banks remained well-capitalised with healthy capital buffers, the report said.
However, the central bank warned that elevated sovereign bond yields, geopolitical tensions and supply-chain disruptions could create near-term stress for corporate earnings and loan portfolios.
On financial markets, RBI said domestic bond yields hardened during FY25-26 amid geopolitical tensions, uncertainty surrounding the India-US trade deal and higher crude oil prices linked to the West Asia conflict.
The 10-year government bond yield crossed the 7% mark during the final trading session of FY25-26 for the first time since July 2024, the report noted.
India’s foreign exchange reserves stood at US$691.1bn (billion) at the end of March 2026, providing import cover of about 11 months and acting as a strong buffer against global shocks.
The report also highlighted continued growth in digital payments. Unified payments interface (UPI) transaction volumes rose 30% during FY25-26 and crossed 200bn transactions.
RBI said it continued work on central bank digital currency pilots, cross-border payment systems and tokenisation projects during the year. It also noted ongoing efforts to strengthen cybersecurity and tackle cyber-enabled financial fraud.
Looking ahead, the central bank said India’s economic momentum would continue to be supported by infrastructure spending, trade agreements with key partners, strong domestic consumption and improving manufacturing capacity.
However, it stressed that policy-makers would need to continuously monitor evolving global developments and geopolitical risks to frame appropriate policy responses.
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