Mumbai, Feb 6 (NationPress) The Reserve Bank of India has elevated its real GDP growth expectations for Q1 and Q2 of 2026-27, projecting figures of 6.9% and 7.0% respectively, as announced by RBI Governor Sanjay Malhotra on Friday.

Detailing the reasoning behind this adjustment, Malhotra indicated that the sustained vitality in the services sector, the rationalization of GST, favorable rabi harvest prospects, a loosening in monetary policy, and a favorable inflation climate are all expected to bolster private consumption. Investment activities are anticipated to continue their upward trajectory, supported by high capacity utilization, favorable financial conditions, healthy balance sheets of financial institutions and corporations, strong credit growth, and the government's persistent focus on capital expenditures.

Additionally, robust domestic demand is anticipated to draw in new investments from the private sector. While services exports are expected to remain strong, merchandise exports will benefit from a potential trade agreement with the US, according to the RBI Governor.

Malhotra also noted that the significant comprehensive trade agreement with the European Union, along with trade arrangements with New Zealand and Oman, should aid in diversifying exports and fortifying the external sector. However, challenges from geopolitical tensions, an unpredictable global trade environment, fluctuations in global financial markets, and international commodity prices persist as downside risks.

He further stated that the real gross domestic product (GDP), according to the First Advance Estimates (FAE), is projected to grow by 7.4% (year-on-year) in 2025-26. Private consumption and fixed investment have made considerable contributions to overall growth. However, net external demand has continued to be a drag, with imports surpassing exports. On the supply side, real GVA growth of 7.3% is driven by a thriving services sector, a resilient agricultural sector, and a resurgence in manufacturing activities.

On the external front, he highlighted that the global economy exhibited notable resilience in 2025, bolstered by trade front-loading, a milder-than-expected impact of tariffs, broad fiscal stimulus, and accommodative monetary policies.

He remarked that inflation is on a gradual decline; however, it remains above target in several advanced economies. US yields are experiencing an upward trend amidst diminishing expectations of immediate rate cuts, supported by solid economic data. Equity markets, underpinned by sustained investment in technology stocks, have advanced, although fiscal strains, geopolitical uncertainties, and monetary policy divergences continue to induce volatility in financial markets.