Reserve Bank of India Raises Growth Forecast Amid AI Risks

The Reserve Bank of India revised its growth projection for 2026-27 upward to 7.1 percent from 6.6 percent, citing a resilient economy with Q1 real GDP growth of 7.8 percent. This growth was driven by strong exports, fixed investment, and private consumption.

In its Monetary Policy Statement, the central bank identified elevated valuations of artificial intelligence-related assets as a primary downside risk to the global economic outlook. Other global headwinds include high public debt, tighter financial conditions, and the unresolved conflict in West Asia. Due to the re-escalation of that conflict, Deputy Governor Poonam Gupta announced the bank raised its annual average oil price assumption by 5 USD per barrel to 95 USD per barrel.

Governor Sanjay Malhotra emphasized that while asset valuations are a risk, AI-driven cyber threats are the most significant concern for central bankers. He noted that the interconnection of financial systems adds a new dimension to these risks and confirmed the bank is using regulatory functions to fortify systems.

Domestically, the bank warned that a deficient southwest monsoon and El Niño conditions threaten agriculture and rural demand. Headline CPI inflation is projected to average nearly 5.8 percent over the next three quarters.