Policy Stability Amid Global Uncertainty
The Reserve Bank of India (RBI) on Thursday announced its decision to keep the repo rate unchanged at 5.25%, while upgrading India’s GDP growth forecast to 7.4% for FY26. The decision, taken unanimously by the Monetary Policy Committee (MPC), underscores confidence in the Indian economy’s resilience even as global uncertainties persist.
Governor Sanjay Malhotra said the Indian economy continues to demonstrate strong fundamentals, supported by domestic demand, improving rural prospects, and steady investment activity. The policy stance was retained as neutral, giving the central bank flexibility to respond to evolving inflation and growth dynamics.
Growth Drivers Remain Strong
The RBI attributed the upward revision in growth to multiple factors, including robust services sector performance, sustained momentum in construction, and a gradual recovery in manufacturing. Improved agricultural prospects, aided by healthy reservoir levels and strong rabi sowing, have also strengthened rural consumption outlook.
Private consumption remains resilient, while government capital expenditure continues to provide a strong backbone to economic activity. Corporate balance sheets have improved, and banks remain well-capitalised, supporting credit growth across sectors.
Inflation Watch Continues
While holding rates steady, the RBI acknowledged mild inflationary pressures. However, headline inflation is expected to remain within the target range, supported by easing food prices and stable core inflation trends. The central bank reiterated its commitment to price stability, noting that inflation risks would be closely monitored in coming months.
The MPC emphasized that future policy actions would be data-dependent, particularly in light of global factors such as geopolitical tensions, volatile crude oil prices, and uncertain financial market conditions.
What It Means for Borrowers and Markets
For households and businesses, the status quo on the repo rate means no immediate change in lending rates, offering relief to homebuyers, MSMEs, and retail borrowers. Stable interest rates also provide predictability for businesses planning capital investments.
Market participants largely welcomed the RBI’s calibrated approach, viewing it as growth-supportive without compromising inflation control.
Balanced and Cautious Approach
The RBI’s latest policy decision reflects a carefully balanced strategy — nurturing growth while remaining alert to risks. With India continuing to outperform many major economies, the central bank’s steady hand aims to sustain momentum while safeguarding macroeconomic stability.
