RBI Keeps Repo Rate Unchanged at 5.25%; Retains Neutral Stance, Projects FY27 GDP Growth at 6.7%

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) concluded its 62nd meeting, held from August 3 to August 5, 2026, under the chairmanship of RBI Governor Shri Sanjay Malhotra. After assessing domestic and global macroeconomic conditions, the six-member committee unanimously voted to keep the policy repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 5.25 per cent. Consequently, the Standing Deposit Facility (SDF) rate remains at 5.00 per cent, while the Marginal Standing Facility (MSF) rate and the Bank Rate continue at 5.50 per cent. The MPC also decided to retain the neutral policy stance, allowing it to respond appropriately to evolving macroeconomic developments.

The RBI stated that the Indian economy remains resilient despite persistent global uncertainties. High-frequency indicators suggest that domestic demand remained steady during the first quarter of FY27, supported by robust private consumption, resilient investment activity, healthy bank credit growth, and continued government infrastructure spending. External demand also remained supportive as strong services exports were complemented by a recovery in merchandise exports. The central bank said these factors continue to reaffirm India's position as the world's fastest-growing major economy. At the same time, it cautioned that geopolitical tensions, volatile crude oil prices, supply chain disruptions and global trade uncertainties remain key external risks.

Looking ahead, the RBI said the domestic economy could face challenges from an uneven south-west monsoon under El Niño conditions, which may affect the agriculture sector and rural demand. However, it noted that government initiatives such as crop diversification, promotion of climate-resilient crops and water conservation measures are expected to help mitigate these risks. Continued momentum in the services sector, GST rationalisation, stable employment conditions, strong capacity utilisation and sustained infrastructure spending are expected to support economic growth.
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Taking these factors into account, the RBI retained its FY27 real GDP growth forecast at 6.7 per cent. The central bank projected GDP growth at 7.0 per cent in Q1, 6.4 per cent in Q2, 6.5 per cent in Q3 and 6.8 per cent in Q4 of FY27, while estimating 7.3 per cent growth in Q1 FY28. The risks to growth were assessed to be broadly balanced.

On the inflation front, the RBI noted that headline Consumer Price Index (CPI) inflation increased to 4.4 per cent in June 2026 after remaining below the target for the previous 16 consecutive months. The increase was primarily driven by higher food and fuel prices, while core inflation excluding food and fuel remained stable at 3.9 per cent. Excluding precious metals, core inflation remained in the 2.3-2.5 per cent range, indicating that underlying demand-driven inflationary pressures continue to remain contained.

The RBI projected CPI inflation at 5.0 per cent for FY27, with Q2 inflation at 4.7 per cent, Q3 at 5.9 per cent and Q4 at 5.5 per cent, while Q1 FY28 inflation is estimated at 5.3 per cent. The central bank also projected core inflation at 4.3 per cent for FY27. Importantly, the MPC stated that headline inflation is expected to rise further in the near term and peak in Q3 FY27, primarily due to food and fuel prices, before moderating thereafter. It added that inflationary pressures have not yet become broad-based, with underlying core inflation remaining relatively benign.

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Disclaimer: The article is for informational purposes only and not investment advice