The Reserve Bank of India on Friday left the key repo rate unchanged at 5.25 per cent, with Governor Sanjay Malhotra stating the Monetary Policy Committee (MPC) preferred to “wait and watch” even as growth prospects improve and inflation stays comfortably low.
The policy stance has been retained as neutral, meaning the RBI has kept the door open for both future rate cuts or hikes, depending on data.
The decision comes after a cumulative 125 basis points reduction in the policy rate since February 2025, including a 25 basis point cut in the previous policy in December. This is the first review after the Union Budget for 2026-27 and follows a three-day MPC meeting held from February 4 to 6, 2026.
GDP outlook up, stance accommodative
All six MPC members voted to keep the repo rate steady, while one external member reiterated a preference for shifting the stance from neutral to accommodative.
Gross Domestic Product is where the RBI Governor sounded more confident. Real GDP for 2025-26 is now estimated at 7.4 per cent, supported by strong private consumption, higher investment and a buoyant services sector. The central bank also revised its projections upwards for the first two quarters of 2026-27 to 6.9 per cent and 7.0 per cent, respectively, citing robust domestic demand, government capital expenditure and improving external prospects due to new trade deals. Recent and prospective trade agreements with the US, the European Union, New Zealand and Oman are expected to diversify exports and strengthen the external sector.
Low CPI inflation
Inflation remains unusually low. Headline CPI inflation was 0.7 per cent in November and 1.3 per cent in December 2025, mainly due to falling food prices, while core inflation excluding food and fuel stayed benign. The RBI now projects CPI inflation at 2.1 per cent for 2025-26, with a temporary uptick in the last quarter due to base effects, and around 4 per cent in the first half of 2026-27.
Malhotra flagged higher prices of precious metals as a key reason for a slight upward revision in the near-term inflation outlook, but stressed that underlying price pressures remain muted.
On global conditions, the RBI Governor noted that the impact of recent tariff changes has been milder than feared, even as global trade tensions and geopolitical risks continue to pose downside risks to India’s outlook. The MPC also highlighted that GST rationalisation and supportive global demand are helping growth, while any renewed tariff shocks could weigh on exports.
The next MPC meeting is scheduled for April 6–8, 2026, after which Malhotra will provide a broader fiscal stance. However, the overall climate seems good, given that the apex bank paused rate cuts while raising GDP despite global headwinds.