Prime Minister Narendra Modi on Saturday met members of the Prime Minister’s Economic Advisory Council, where discussions focused on ideas and measures to boost the country’s economic growth amid the ongoing global uncertainty.
The meeting discussed reforms aimed at improving ease of living and ease of doing business. The Prime Minister and members of the EAC-PM exchanged views on ways to promote economic growth in the current environment of global turmoil. The Council also shared its assessment of the impact of the conflict in the Middle East on India and the world. The meeting comes a day after the Reserve Bank of India’s Monetary Policy Committee (MPC) meeting, when the governor announced to keep the repo rate unchanged at 5.25% and maintain a neutral stance amid geopolitical tensions, inflation fears and supply chain disruptions.
India’s growth story
Reserve Bank of India (RBI) Governor Sanjay Malhotra said that the Monetary Policy Committee, after reviewing the macroeconomic and financial conditions, has decided to keep the repo rate under the Liquidity Adjustment Facility unchanged at 5.25%. Accordingly, the standing deposit facility rate remains at 5%, while the marginal standing facility rate and bank interest rate stand at 5.5%. The global economy continues to face “increased uncertainty, disruptions to key trade routes and supply chains, increased market volatility, and cautious business sentiment,” he said, adding that India entered the current phase of turmoil with stronger fundamentals than in previous episodes.
He also said policymakers should use the disruption as an opportunity to boost economic resilience. Malhotra pointed to geopolitical tensions in the Middle East, rising energy prices and supply chain pressures as key risks to the global outlook, noting that central banks are increasingly balancing between supporting growth and controlling inflation. The Monetary Policy Committee’s decision comes after its meeting in April, where it also left interest rates unchanged at 5.25% with a neutral stance.The central bank also revised its economic forecasts, lowering GDP growth for fiscal year 2026-2027 to 6.6% from 6.9%, citing rising energy and commodity prices, conflict-related supply disruptions in West Asia, and global financial volatility. Growth is expected to range between 6.3% and 6.8% over the quarters.Inflation expectations were revised upward to 5.1% for fiscal year 2026-27, about 50 basis points higher than previously estimated, driven by higher global crude oil prices and higher industrial input costs.
The core inflation rate is expected to reach 4.7%.
Attracting foreign investors
Separately, the Reserve Bank of India cited expectations of stronger foreign capital inflows and improved balance of payments following a raft of measures to attract external investment and ease external financing conditions. Malhotra said the central bank is not targeting a specific number for inflows but expects the measures to generate significant capital inflows. The Reserve Bank of India has expanded foreign investors’ access to government securities under the full access route and relaxed several restrictions on foreign portfolio investors.
It also raised investment limits for non-resident Indians and overseas Indian citizens in listed stocks. To support external financing, the RBI has provided foreign exchange swap facilities on concessional terms to public sector enterprises raising funds through external commercial borrowings, along with facilities allowing approved commercial banks to bear hedging costs on new FCNR-B deposits. It was also proposed to return the time period for achieving export revenues to nine months. Malhotra said the RBI expects healthy inflows from external loans, deposits and equity investments, which together will support a stronger balance of payments position. Malhotra said the rise in global crude oil prices has led to increased input costs in sectors such as energy, chemicals, metals and industrial materials, with a partial transition to domestic fuel prices beginning. He added that companies are expected to pass on the cost increases gradually. He also noted that inflation has remained relatively under control in recent months, with core inflation and fuel prices largely stable earlier in the year. Risks to inflation and growth remain high due to global supply disruptions, weather-related risks and geopolitical tensions, the Reserve Bank of India (RBI) Governor said, adding that the central bank will continue to monitor the effects of the second round before adjusting policy, and will await further clarity in an uncertain global environment.