Saugata Bhattacharya, one of the three external members of the Reserve Bank of India’s rate-setting panel.THE GROSS Domestic Product (GDP) growth projection is likely to moderate with inflation expected to gradually move closer to the target in the coming quarters, and this is in line with the forecasts of the Monetary Policy Committee (MPC) resolution, said Saugata Bhattacharya, one of the three external members of the Reserve Bank of India’s rate-setting panel.Consumer Price Index (CPI) inflation is projected at 2 per cent for FY26. For 2026-27, CPI inflation is expected at 3.9 per cent in Q1 and 4 per cent in Q2. Under the flexible inflation targeting regime, RBI is mandated to keep inflation at 4 per cent with a band of +/- 2 per cent.“Now that inflation is forecast to gradually normalise towards the target over the next few quarters, GDP growth ‘prints’ will also slow in line with the forecasts in the MPC resolution,” Bhattacharya said in an interview to The Indian Express.After averaging at 8 per cent in the first half of 2025-26, the real GDP is likely to expand at a slower pace of close to 7 per cent in the second half, with the Reserve Bank of India (RBI) projecting Q3 growth at 7 per cent Q4 at 6.5 per cent. In Q1 and Q2 of FY27, the economy is expected to grow at 6.7 per cent and 6.8 per cent, the RBI said during its December monetary policy announcement.Bhattacharya said the GDP growth in the first half of FY26 had been unexpectedly high, led by the effects of lower than forecast CPI and occasional negative WPI inflation. This had resulted in ambiguities in interpretation of underlying economic activity.“High frequency indicators suggest a slight moderation in economic momentum, but these were largely trade related and even that seems to be transient,” Bhattacharya said, adding a disclaimer the views expressed were his own and not those of the MPC.Earlier this month, the six-member MPC lowered the repo rate by 25 basis points (bps) to 5.25 per cent to support growth.Story continues below this adWhen asked whether supporting growth at this juncture could reignite inflation risk amid weaker rupee and volatile crude oil prices, Bhattacharya, a Senior Fellow at the Centre for Policy Research, said that at present there is little evidence to suggest that the economy is overheating.“Manufacturing output for many quarters has been at capacity utilisation levels (of nearly 74-75 per cent), which are lower than around 80 per cent I have seen in the past, giving pricing power to producers,” he said, adding that merchandise imports suggest that external supply is also adding to this ‘overcapacity’.Metal prices remain stable, and crude oil is still expected to hover around $60 a barrel, barring geopolitical shocks, he said.In response to a question on the scope for further repo rate cuts, the MPC member said it was difficult to offer forward guidance due to the prevailing uncertainty.Story continues below this ad“The decision at each meeting will be based on the available data, evaluating the emerging risks, and proceed meeting by meeting,” he said.Bhattacharya, however, said that policy interest rate is now consistent with ‘macroeconomic stability’. © The Indian Express Pvt Ltd