New Delhi, Oct 1 (UNI) Reserve Bank of India (RBI) today revised real Gross Domestic Product (GDP) growth for FY 2025-26 at 6.8 pc from the previous projection of 6.5pc.
The Central Bank has cited multiple reasons behind these revisions, like rising capacity utilisation, conducive financial conditions and improving domestic demand.
RBI also pointed towards the ongoing tariff and trade policy uncertainties that will impact external demand. Moreover, prolonged geopolitical tensions and volatility in international financial markets caused by risk-off sentiments of investors pose downside risks to the growth outlook.
On the inflation side, the RBI said the inflation outcome is likely to be softer than what was projected in August. The positive outlook is linked to the GST rate rationalisation that will lead to a reduction in prices of several items in the CPI basket.
A ‘CPI basket’ is the collection of commonly purchased goods and services like food, housing and healthcare that are used to measure changes in the cost of living over time.
“ Considering all these factors, CPI inflation for 2025-26 is now projected at 2.6 pc with Q2 at 1.8 per cent; Q3 at 1.8 per cent; and Q4 at 4.0 per cent. CPI inflation for Q1:2026-27 is projected at 4.5 per cent The risks are evenly balanced,” said Sanjay Malhotra.
On the external front, RBI noted that India’s services exports driven by software and business services, witnessed robust growth in July-August 2025. Furthermore, robust services exports, coupled with strong remittance receipts, is expected to keep the current account deficit (CAD) sustainable during 2025-26.
On the net external financing side, net foreign direct investment reached a 38-month high in July 2025, driven by increased gross foreign direct investment and a moderation in repatriation and outward foreign direct investment.
As of September 26, 2025, India’s foreign exchange reserves stood at USD 700.2 billion, sufficient to cover more than 11 months of merchandise exports. Overall, India’s external sector continues to be resilient, and we remain confident of meeting our external obligations comfortably.
“System liquidity, as measured by the net position under the Liquidity Adjustment Facility (LAF), stood at an average daily surplus of Rs2.1 lakh crore since the last MPC meeting in August 2025,” said Malhotra.
Going ahead, the drawdown of government cash balances and the remaining 75 basis points cut in the cash reserve ratio (CRR) during October-November will aid banking system liquidity in the near-term. Through our two-way operations, we will actively manage liquidity to anchor short-term rates.
Coming to the money markets, these rates have remained relatively stable amidst comfortable liquidity conditions. During February-August 2025, in response to the 100-basis points (bps) cut in the policy repo rate, the weighted average lending rate (WALR) of Scheduled Commercial Banks moderated by 58 bps for fresh rupee loans; 71 bps is on account of the interest rate effect.
The moderation of outstanding rupee loans is to the extent of 55 bps.
On the deposit side, the weighted average domestic term deposit rate (WADTDR) on fresh deposits declined by 106 bps, while that on outstanding deposits softened by 22 bps over the same period. Transmission has been broad-based across sectors. Going forward, adequate liquidity in the system and the remaining CRR cuts will further facilitate monetary transmission.
The system-level financial parameters related to capital adequacy, liquidity, asset quality, and profitability of Scheduled Commercial Banks (SCBs) continue to remain healthy.
Similarly, the system-led parameters of Non-Banking Financial Companies (NBFCs) are also sound, with adequate capital and improved Gross Non-Performing Assets (GNPA) ratios.
Overall, the future outlook for external finance, money markets, and GDP Forecast is fueled up with optimism. It is due to the robust policy making of Central government and forerunner schemes like GST, which have reduced the inflation burden on the economy.
