Key Takeaways From RBI's FY26 Annual Report Ahead Of MPC Meeting

Ahead of Reserve Bank of India's Monetary Policy Committee (MPC) in June, India's central bank noted that the South Asian country's gross domestic product (GDP) surged to 7.6%, up from 7.1 per cent in the previous year.

On the demand side, private final consumption expenditure and fixed investment served as the key growth drivers, however, the imposition of US tariffs initially triggered concerns, their overall impact remained muted, with net exports exerting a modest drag of 0.1 percentage points on growth, according to RBI's FY26 annual report.

On the supply side, the services sector and a manufacturing performance helped offset subdued agricultural activity.

"Growth in gross value added (GVA) in the agriculture and allied sector moderated during 2025-26, reflecting weather-related disruptions in kharif crops, although favourable rabi conditions provided support," it stated.

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Manufacturing Push Aids Industrial Sector Growth In FY26

In the year ended March 31, 2026, industrial sector's growth was buoyed by manufacturing activities.

The growth was facilitated by industrial credit growth and broad sectoral policies like the production linked incentive (PLI) scheme and the National Manufacturing Mission.

Meanwhile, broad-based expansion in sectors like basic metals, motor vehicles, and other transport equipment propelled growth.

"The services sector continued to be the primary driver of aggregate supply, contributing to around 69% of real GVA growth," as per RBI's annual report.

Labour market conditions remained stable during January - December 2025, however, the share of agriculture sector continued to decline in total employment, while that of other services, manufacturing and trade sectors increased

India's Key FY26 Monetary Policy Takeaways

"Aided by sharp moderation in headline inflation to historical lows, the Monetary Policy Committee (MPC) continued with the easing cycle initiated in February 2025 and reduced the policy repo rate by a cumulative 100 basis points (bps) to 5.25 per cent during 2025-26. During the year, the policy stance was changed from neutral to accommodative in April 2025 but reverted to neutral in June 2025," it noted.

Monetary policy focused on maintaining congenial financial conditions during the year through a mix of policy rate cuts and reduction in the cash reserve ratio (CRR) along with several measures that injected durable liquidity.