The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday left the benchmark repo rate unchanged at 5.25 per cent, choosing to maintain the current policy settings amid persistent global uncertainties, renewed tensions in West Asia and concerns over inflationary pressures. The central bank also retained its ‘neutral’ policy stance, signalling a cautious approach towards future monetary decisions.
Along with the repo rate, the Standing Deposit Facility (SDF) rate was kept at 5 per cent, while the Marginal Standing Facility (MSF) rate and the Bank Rate remained unchanged at 5.50 per cent.
RBI Upgrades Economic Growth Forecast
Despite external risks, the RBI expressed confidence in India’s economic resilience by revising its FY27 GDP growth forecast upward to 6.7 per cent, an increase of 10 basis points from its earlier estimate.
RBI Governor Sanjay Malhotra said domestic demand continues to remain the key growth driver, supported by healthy manufacturing and services activity along with robust export performance.”The economy continues to be supported by resilient domestic demand, sustained expansion in manufacturing and services activity, and robust exports,” Malhotra said.
Inflation Outlook Remains Under Watch
The Governor noted that inflation recorded during the first quarter of FY27 came in slightly below the central bank’s earlier estimates, mainly because rising costs were not fully reflected in consumer prices.
He, however, cautioned that inflation is expected to move higher in the coming months, largely due to food and fuel prices rather than widespread price increases across the economy.
According to the RBI, headline inflation is likely to peak during the third quarter of FY27 before easing gradually. “The recent rise in inflation has been driven mainly by food and fuel, with little evidence of broader price pressures so far,” Malhotra said.
Core Inflation Continues To Stay Stable
The RBI highlighted that underlying inflation, excluding precious metals, has remained broadly stable and is expected to stay aligned with earlier projections through the remainder of the financial year.
This suggests that inflationary pressures are still concentrated in a few sectors rather than becoming broad-based across the economy.
Global Uncertainty Calls For Caution
Explaining the decision to maintain the current policy stance, Malhotra said uncertainties surrounding global trade developments and geopolitical risks continue to cloud the economic outlook. “The outlook, however, is hazy because of the uncertainties regarding global trade policy. There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action,” he said.
The RBI’s latest policy decision indicates that while the Indian economy continues to show resilience, the central bank is opting for a wait-and-watch approach until inflation trends and global economic conditions become clearer.
