RBI Kept Repo Rate Unchanged: Maintained Policy Stance Neutral

The Reserve Bank of India’s rate-setting panel, the Monetary Policy Committee, has kept the repo rate unchanged at 5.25% while maintaining a “neutral” stance. This comes after a cumulative rate cut of 125 basis points since February 2025, reflecting a measured approach amid evolving macroeconomic conditions.

Growth Outlook and Inflation Projections

The central bank remains optimistic about economic activity heading into FY27. It has revised its GDP growth projections upward for the first half of the year, with Q1FY27 now estimated at 6.9% (up from 6.7%) and Q2FY27 at 7% (up from 6.8%). Overall, real GDP growth for the year is projected at 6.9%, with quarterly estimates of 6.8%, 6.7%, 7%, and 7.2%.

According to RBI Governor Sanjay Malhotra, CPI inflation is expected at 4.6% for the year. The quarterly trajectory is projected at 4% in Q1, 4.4% in Q2, rising to 5.2% in Q3 before easing to 4.7% in Q4. Earlier, the MPC had slightly raised inflation estimates for Q1FY27 to 4.0% and Q2FY27 to 4.2%.

Risks to Outlook

Despite stable projections, risks remain tilted to the downside. Ongoing geopolitical tensions, particularly in West Asia, heightened volatility in global financial markets, and weather-related uncertainties could weigh on growth. The RBI noted that uncertainty remains elevated, requiring close monitoring of developments.

External Sector & Policy Support

India’s external sector indicators remain broadly favourable. However, global trade and investment uncertainties continue to demand vigilance. On the domestic front, the government’s push to scale up manufacturing in key and emerging sectors is expected to support the country’s growth trajectory.

Demand Trends

Domestic demand conditions remain resilient. Private consumption is likely to be supported by discretionary spending, while rural demand continues to stay strong. Favourable agricultural conditions and a healthy labour market are expected to further boost rural consumption in the coming months, as highlighted by Sanjay Malhotra.

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