RBI’s Gupta sees India growth nearing 7% despite mounting inflation risks

India’s economy could grow close to 7% in the fiscal year ending March 2027, beating the central bank’s official forecast, Reserve Bank of India (RBI) deputy governor Poonam Gupta said on Thursday, 20 August.

The assessment rests partly on a stronger start to the year. Gupta said high-frequency indicators pointed to growth of more than 7% in the April-June quarter, while some private estimates ran as high as 7.5%.

“It means that a year-around growth rate can be much higher, close to 7%,” she said during a lecture, titled Indian Economy: Shocks, Resilience and the Way Forward, at the Madras School of Economics in Chennai, the Financial Express reported.

Official figures for the quarter are due later in August.

The RBI this month raised its FY27 growth forecast by 10 basis points to 6.7%, with quarterly growth projected at 7% in April-June, 6.4% in July-September, 6.5% in October-December and 6.8% in January-March. It expects growth to accelerate to 7.3% in the first quarter of FY28.

Gupta’s forecast is notably stronger than those of several international institutions. The International Monetary Fund cut its FY27 estimate to 6.4% in July, citing high oil prices and a weak monsoon as the biggest risks. The OECD expects growth of 6.3%, with higher food and energy costs weighing on consumption.

Gupta argued that the economy was holding up despite what she described as a triple shock of elevated oil prices, US tariffs and unusually high global uncertainty. A deficient or uneven monsoon has added another threat to agricultural output and rural demand.

“You have a possibility of rainfall not being as conducive, and your economy is growing close to 7%. That speaks to the resilience of the economy,” she said.

Her comment that 7.5% growth was “a given” was framed as a longer-term view of India’s underlying potential, rather than a forecast for FY27. For the current year, she said growth could be close to 7%.

The optimism on growth sits alongside greater caution on inflation. Minutes of the RBI’s August policy meeting showed Gupta saying that further monetary easing was no longer warranted and that “a case for a hike may emerge during the course of the year.”

The RBI unanimously left the repo rate unchanged at 5.25% and retained a neutral stance at the meeting. It expects consumer inflation to average 5% in FY27 and peak at 5.9% during the October-December quarter.

Food and fuel have so far driven most of the increase, while underlying inflation remains relatively contained. But the central bank is watching for evidence that higher energy, transport and raw-material costs are spreading into a wider range of consumer prices.

Gupta said the RBI needed more clarity on the monsoon, global developments and the extent to which supply-side inflation was becoming entrenched before changing rates.

The growth outlook may complicate that judgment. An economy expanding faster than forecast gives the central bank more room to raise rates if inflation broadens, though Gupta and other monetary policy committee members have said there is little evidence of demand-driven overheating so far.

She was also upbeat about India’s external position, pointing to services exports, remittances, the diversification of export markets and an improving balance-of-payments outlook. India has introduced incentives to attract foreign-currency deposits and other overseas capital as it seeks to stabilize the rupee and contain imported inflation.

The RBI’s August policy minutes said the economy continued to benefit from private consumption, infrastructure spending, resilient investment and strong exports of goods and services. The principal risks remain oil, the monsoon, the conflict in West Asia and further changes in US trade policy.