RBI MPC Meeting Decision: The Reserve Bank of India (RBI) has unanimously decided to keep the policy repo rate unchanged at 5.25 percent.
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RBI MPC Meeting Decision: RBI Governor Sanjay Malhotra said that the Monetary Policy Committee (MPC) has unanimously decided to keep the policy repo rate unchanged at 5.25 percent. The Governor said that despite global shocks, retail inflation (CPI) in the country remains below the target as its impact on domestic prices has been limited. However, according to baseline estimates, overall inflation may move towards the upper tolerance limit in the third quarter (Q3) of the current financial year.
West Asia tensions impact global economy
RBI Governor Malhotra stated that ongoing geopolitical tensions in West Asia have cast a shadow over the global economic outlook. Rapidly rising energy prices and supply chain disruptions worldwide have severely impacted economic activity. For the past few months, the global economy has been grappling with uncertainty, disruptions in trade routes, supply chain disruptions, increased market volatility, and cautiousness among businesses. However, this time the Indian economy is not as weak as it was last time.
“First, I want to make it clear that the Indian economy enters this global turmoil with much better fundamentals than in previous periods. We are fully prepared and confident to weather these shocks with minimal damage,” he said.
CPI inflation below target
The Reserve Bank of India stated that CPI inflation remains below target despite global shocks, as their impact on domestic prices has been limited. However, baseline estimates suggest overall inflation may rise towards the upper tolerance limit in the third quarter (Q3) of this year. The impact of the supply shock is expected to ease from the fourth quarter (Q4). Currently, underlying inflation pressures remain moderate. However, second-round effects are expected to spread inflation, impacting public expectations and wages, and therefore, will need to be closely monitored. The future outlook is unclear due to the Meteorological Department’s forecast of a sub-normal southwest monsoon and the EI Nino risk.
RBI GDP growth estimates
The Reserve Bank of India (RBI) has lowered its economic growth (real GDP) forecast for the country for the fiscal year 2026-27 (FY27) from 6.9% previously to 6.6%.
Q1 FY27 (April-June 2026): 6.6% (earlier 6.8%)
Q2 FY27 (July-September): 6.3% (earlier 6.7%)
Q3 FY27 (October-December): 6.5% (earlier 7%)
Q4 FY27(January-March 2027): 6.8% (earlier 7.2%)
The Reserve Bank of India’s Monetary Policy Committee (MPC) has raised its CPI inflation forecast for fiscal year 2026-27 (FY27). It was previously projected at 4.6% and has now been revised to 5.1%. This increase is primarily due to higher prices of commercial LPG, base metals, plastics, rubber, and other essential commodities.
Inflation forecast increased
The Reserve Bank of India’s Monetary Policy Committee (MPC) has raised its CPI inflation forecast for fiscal year 2026-27 (FY27) to 5.1% from 4.6% previously. This increase is primarily due to higher prices of commercial LPG, base metals, plastics, rubber, and other essential commodities.
Quarterly Estimates
Q1 FY27 (April-June): raised from 4.0% to 4.2%
Q2 FY27 (July-September): raised from 4.4% to 5.1%
Q3 FY27 (October-December): raised to 5.9% from 5.2%
Q4 FY27 (January-March): increased from 4.7% to 5.4%
The RBI is now maintaining a cautious stance to keep inflation under control. The public may see an impact, particularly on fuel and daily necessities. The government and the RBI are jointly taking measures to control prices.
Expert opinion on RBI’s decision
Sandeep Aggarwal, CEO and CIO of Modulus Alternatives, said, “The MPC’s decision demonstrates the RBI’s commitment to maintaining the right balance between growth, inflation, and financial stability in this environment of global uncertainty. By maintaining policy flexibility and keeping interest rates unchanged, the central bank has expressed confidence in India’s growth trajectory, while remaining vigilant about external risks. The measures announced today continue to support economic activity and liquidity, ensuring productive sectors remain adequately funded despite global turmoil. Policy stability is particularly good news for private credit. As traditional banks have become more selective, private credit is increasingly filling the funding gap for well-established businesses.”
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