New Delhi: RBI Governor Sanjay Malhotra on Wednesday said that while tariff-related developments may slow growth in the second half of FY26, recent structural reforms announced by Prime Minister Narendra Modi, including GST rationalisation, are expected to cushion the impact of external headwinds. Speaking during the fourth bi-monthly monetary policy review of FY26, Malhotra noted that the domestic economy remains resilient, supported by a favourable monsoon, low inflation, and continued monetary easing.
The central bank has revised its GDP forecast for FY26 upwards to 6.8% from the earlier estimate of 6.5%, reflecting sustained momentum in domestic economic activities during the second quarter. “The implementation of several growth-inducing structural reforms, including streamlining of GST, are expected to offset some of the adverse effects of external factors,” Malhotra said, highlighting the supportive role of policy measures in maintaining robust growth.
On external sector performance, Malhotra said software and services exports remain strong, and India’s foreign exchange reserves of $700.2 billion are sufficient to cover 11 months of imports. He also noted that strong remittances will help keep the current account deficit manageable.
Regarding inflation, the RBI now projects it at 2.6% for FY26, down from the earlier estimate of 3.1%. “Sobering inflation supports monetary policy to sustain growth. An above-normal monsoon, good kharif sowing, and adequate reservoir levels are expected to boost agricultural and rural demand,” he added. Buoyancy in the services sector, rising capacity utilisation, favourable financial conditions, and improving domestic demand are anticipated to further encourage fixed investment.
The Reserve Bank of India’s monetary policy committee (MPC) has kept the key repo rate unchanged at 5.5%, with the policy stance remaining ‘neutral’. The unanimous decision reflects the RBI’s focus on balancing growth support with macroeconomic stability amid global uncertainties.
