RBI keeps repo rate unchanged; raises GDP growth forecast to 6.8% 

The Reserve Bank of India’s Monetary Policy Committee 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% and also decided to retain the stance at neutral,” RBI Governor Sanjay Malhotra said.

The RBI also revised its real GDP growth forecast for FY2026 to 6.8%, up from 6.5%, reflecting increased confidence in the economy’s momentum. Malhotra said that buoyancy in services sector coupled with steady employment conditions is supportive of demand.

He expressed optimism that it would get a further boost from the rationalisation of GST. Malhotra underlined that the implementation of several growth-inducing structural reforms, including the streamlining of GST, are 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 per cent. Q2 now is projected at 7 per cent, Q3 at 6.4 and Q4 at 6.2 per cent. Real GDP growth for Q1 next year is projected at 6.4 per cent,” Malhotra said.

The MPC noted that the progress of the southwest monsoon has been satisfactory. 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, the 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, which is significant to achieve the inflation target and sustainable economic growth.

In its August meeting, the MPC had unanimously kept the repo rate unchanged at 5.5 per cent. The RBI in its February and April meetings cut the repo rate by 25 basis points each followed by a 50 basis points cut in June.