India to grow at 6.9% in FY27 despite West Asia conflict: RBI

The RBI projected robust growth despite ongoing geopolitical tensions and conflict in West Asia.

The country’s central bank said rising domestic demand and increased investment activity are expected to remain the key drivers of economic growth in the coming fiscal year.

The RBI said India remained resilient and the fastest growing major economy in FY2026 expanding at 7.6% supported by strong domestic consumption, sustained investment, proactive policy initiatives and sound macroeconomic fundamentals.

The report says the financial sector remained resilient on the back of healthy bank and non-bank balance sheets, improved asset quality and capital buffers, enabling double-digit credit growth.

On the fiscal front, consolidation efforts continued along with improvement in expenditure quality and containment of revenue expenditure. A modest current account deficit (CAD) and adequate forex reserves provided resilience to the external sector even as portfolio investment exhibited net outflows, the bank added.

The RBI expects the domestic economy in 2026-27 to remain resilient, despite a challenging external environment characterised by elevated energy and commodity prices, rising logistics costs, volatility in global financial markets and uncertainties surrounding global trade policies.

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 central bank said.