MUMBAI: RBI’s Oct 2026 State of the Economy report flagged rising inflation, geopolitical tensions and global financial volatility as key risks to India’s growth outlook, even as strong domestic demand, services activity and exports supported economic momentum.The report said headline CPI inflation rose to a 23-month high of 5.5% in Sept from 4.8% in Aug, with price increases spreading across food, fuel and core items. Core inflation rose to 4.3%, while core inflation excluding precious metals reached 3.2%. WPI inflation climbed to 11.4% under the 2022-23 base series. The report highlighted early signs of inflation generalisation, with a rising share of CPI items recording inflation above 6%.The report said deficient rainfall in some regions could adversely affect kharif crop yields. However, rice and wheat stocks stood at 3.3 times the quarterly buffer norm as of Oct 1, providing a cushion against supply disruptions. Higher minimum support prices announced on Sept 30 for the 2027-28 rabi marketing season were intended to ensure remunerative prices and incentivise crop diversification.
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Globally, the IMF outlook remained subject to downside risks, including the West Asia conflict, trade tensions, high sovereign bond yields, elevated public debt and concerns over fiscal sustainability. The global growth projection for 2027 assumed the reopening of the Strait of Hormuz in March and a broad return to pre-war conditions by Oct 2027. The report identified positive technology shocks and gains from artificial intelligence as potential offsets to the global slowdown.The report highlighted mounting global financial risks as geopolitical frictions in West Asia intensified inflationary pressures and disrupted supply chains. Elevated sovereign bond yields in advanced economies raised concerns about fiscal sustainability and financial stability, particularly amid debt and fiscal pressures in France and the US.
