Prime Minister Narendra Modi on Saturday met members of the Economic Advisory Council (EAC) to the Prime Minister, with discussions focused on ideas and measures to further strengthen the country's economic growth amid ongoing global uncertainty. The meeting covered reforms aimed towards improving ease of living and ease of doing business.
The PM and EAC-PM members exchanged views on ways to boost economic growth in the current environment of global turmoil. The council also shared its assessment of the impact of the Middle East conflict on India and the world.
The meeting comes a day after Reserve Bank of India’s Monetary Policy Committee (MPC) meeting, when the governor announced keeping the policy repo rate unchanged at 5.25% and maintaining a neutral stance amid geopolitical tensions, inflation concerns and supply chain disruptions.
India's growth story
RBI Governor Sanjay Malhotra said that the MPC, after reviewing macroeconomic and financial conditions, decided to keep the repo rate under the Liquidity Adjustment Facility unchanged at 5.25%. Accordingly, the Standing Deposit Facility remains at 5%, while the Marginal Standing Facility and Bank Rate stand at 5.5%.
He said the global economy continues to face “heightened uncertainty, disruptions to key trade routes and supply chains, increased market volatility, and cautious business sentiment,” adding that India entered the current phase of turbulence with stronger fundamentals than in previous episodes. He also said policymakers should use the disruption as an opportunity to further strengthen economic resilience.
Malhotra pointed to geopolitical tensions in the Middle East, soaring energy prices and supply chain pressures as key risks to the global outlook, noting that central banks are increasingly balancing growth support with inflation control. The MPC decision follows its April meeting, when rates were also left unchanged at 5.25% with a neutral stance.
The central bank has also revised its economic outlook, lowering GDP growth for FY2026-27 to 6.6% from 6.9%, citing elevated energy and commodity prices, supply disruptions linked to the West Asia conflict, and global financial volatility. Growth is expected to range between 6.3% and 6.8% across quarters.
Inflation projections have been revised upward to 5.1% for FY2026-27, about 50 basis points higher than earlier estimates, driven by rising global crude oil prices and higher industrial input costs. Core inflation is projected at 4.7%.
Attracting foreign investors
Separately, the RBI has indicated expectations of stronger foreign capital inflows and an improved balance of payments following a set of measures to attract overseas investment and ease external financing conditions.
Malhotra said the central bank is not targeting a specific inflow figure but expects the measures to generate substantial capital inflows. The RBI has expanded foreign investor access to government securities under the Fully Accessible Route and eased several restrictions for foreign portfolio investors. It has also raised investment limits for non-resident Indians and overseas citizens of India in listed equities.
To support external financing, the RBI has introduced a concessional foreign exchange swap facility for public sector undertakings raising funds through external commercial borrowings, along with a facility allowing authorised dealer banks to bear hedging costs on fresh FCNR-B deposits. The time period for export proceeds realisation has also been proposed to be restored to nine months.
Malhotra said the RBI expects healthy inflows from external borrowings, deposits and equity investments, which together would support a stronger balance of payments position.
Malhotra said higher international crude prices have increased input costs across sectors such as energy, chemicals, metals and industrial materials, with partial pass-through to domestic fuel prices beginning. He added that firms are expected to gradually pass on cost increases.
He also noted that inflation had remained relatively contained in recent months, with core inflation stable and fuel prices largely steady earlier in the year.
The RBI Governor said risks to inflation and growth remain elevated due to global supply disruptions, weather-related risks and geopolitical tensions, adding that the central bank will continue monitoring second-round effects before adjusting policy, and will wait for greater clarity in an uncertain global environment.
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