RBI keeps repo rate unchanged at 5.5%, raises GDP growth forecast

The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday decided to keep the policy repo rate unchanged at 5.5 per cent following a detailed assessment of the evolving macroeconomic and financial developments.

The central bank also maintained its “neutral” stance.

“The MPC considered it prudent to wait for the impact of policy actions to play out, and for greater clarity to emerge before starting the next course of action. Accordingly, the MPC unanimously voted to keep the policy repo report unchanged at 5.5 per cent and also decided to retain the stance at neutral,” RBI Governor Sanjay Malhotra said.

The RBI also revised its GDP growth forecast for FY2026 to 6.8 per cent, up from 6.5 per cent, reflecting increased confidence in the economy’s momentum.

Malhotra said buoyancy in the services sector, coupled with steady employment conditions, were supportive of demand, expressing optimism that it would get a further boost from the rationalisation of GST.

Malhotra said the implementation of several growth inducing structural reforms, including the streamlining of GST, were expected to offset some of the adverse effects of the external headwinds.

“Taking all these factors into account, real GDP growth or this year is now projected at 6.8%. Q2 now is projected at 7%. Q3 at 6.4, Q4 at 6.2%. Real GDP growth for Q1 next year is projected at 6.4%,” Malhotra said.

The MPC noted that satisfactory progress of the southwest monsoon, healthy kharif sowing, adequate reservoir levels, and comfortable buffer stock of food grains should keep food prices benign.

It projected CPI inflation for the current year at 2.6 per cent. “The recently implemented GST rate rationalisation could also lead to a reduction in prices of several items in the CPI basket.

Overall, the inflation outcome is likely to be softer than what was projected in August.

Primarily on account of the GST rate cuts and benign food prices, considering all these factors, CPI inflation for this year is now projected at 2.6 per cent, with Q2 and Q3 at 1.8 per cent, Q4 at 4 per cent, and Q1 next year at 4.5 per cent.

“The risks are evenly balanced,” he said.

The Reserve Bank of India’s Monetary Policy Committee on Monday commenced its three-day meeting to determine the policy repo rate.