RBI cuts India's GDP forecast to 6.5%, inflation to 4%, as it adjusts economic projections amid global uncertainties

The Reserve Bank of India (RBI) on Wednesday, announced that it has cut its estimates on both India's Gross Domestic Product (GDP) and inflation, measured by the Consumer Price Index (CPI), citing the ongoing global trade disruptions.

“The global economic outlook is fast changing,” RBI Governor Sanjay Malhotra said during his monetary policy address. “The recent trade tariff related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation.”

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By how much did the RBI cut India's GDP forecast?

The RBI cut its Real GDP forecast for the financial year 2025-26 to be 6.5%, from 6.7% earlier.

The first quarter GDP forecast is now estimated to be at 6.5% second quarter at 6.7%, third quarter at 6.6%, and fourth quarter at 6.3%.

During the previous Monetary Policy decision announcement in February, the first quarter estimate was 6.7%, second quarter estimate was 7%, and it was 6.5% for both the third quarter and fourth quarter.

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“Despite the growth forecast downgrade, the RBI’s FY26 GDP forecast of 6.5% still appears optimistic to us,” said Sonal Varma, Managing Director and Chief Economist (India and Asia ex-Japan), Nomura. “We believe the combination of direct and indirect effects will result in GDP growth slowing more sharply to around 6% in FY26, and risks are skewed to the downside.”

She added that as a result, “we expect the rate cutting cycle to continue, with a 25bp cut each in June and August.”

By how much did the RBI cut India's inflation forecast?

Meanwhile, the inflation estimate was cut from 4.2% earlier to 4% now.

The first quarter inflation estimate is now at 3.6%, second quarter is at 3.9%, third quarter is at 3.8%, and the fourth quarter is slightly higher at 4.4%.

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“On the inflation front, risks have receded considerably,” said Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group. “A durable softening in food prices, a sharp correction in inflation expectations, and a notable decline in crude oil prices have led the RBI to revise its inflation projection.”

He added that “we expect the actual outturn to be even lower, assuming global commodity markets remain benign.”

All of this comes as US President Donald Trump's 26% tariffs on Indian goods has come into effect. On top of this, tariffs on China have skyrocketed to as high as 104% after the nation retaliated.

For the Indian economy and the rate cut, Nomura's Varma said that “the combination of downgrades to its GDP growth and inflation projections and the change in stance to accommodative all reinforce that this is a dovish cut” and that “with inflation at target, the MPC’s focus is supporting growth, amid rising downside risks to growth from US tariffs.”