- RBI maintained repo rate, improved growth and inflation outlook.
- Global uncertainty prompted pause, India’s economy remained robust.
- FY27 GDP growth upgraded to 6.7%, inflation forecast trimmed.
RBI MPC Highlights: The Reserve Bank of India (RBI) delivered a largely expected policy outcome on Wednesday, leaving the benchmark repo rate unchanged at 5.25 per cent, but its latest assessment of the economy carried a more optimistic tone than its June review.
While policymakers chose not to alter interest rates, the central bank raised its FY27 growth forecast to 6.7 per cent and trimmed its inflation projection to 5 per cent, signalling greater confidence in the resilience of domestic demand even as geopolitical tensions, volatile oil prices and an uneven monsoon continue to cloud the global outlook.
The six-member Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, voted unanimously to maintain the policy repo rate and retain its Neutral stance, indicating that it wants more clarity on inflation before considering any change in monetary policy.
Why The RBI Chose To Pause
Unlike previous policy reviews that were largely centred on inflation, this time the RBI acknowledged that the biggest challenge is uncertainty.
Governor Malhotra said the global economy continues to grapple with renewed conflict in West Asia, fresh tariff actions by the United States and volatile financial markets, all of which have complicated the outlook for growth and inflation. Oil prices have remained unpredictable, supply chains have once again come under pressure and several global central banks have either tightened policy or maintained a cautious approach as inflation concerns linger.
Against this backdrop, the MPC concluded that maintaining the current policy settings was the most appropriate course of action until there is greater visibility on the inflation trajectory.
Also Read : RBI MPC August 2026: Repo Rate Unchanged At 5.25%, MPC Retains Neutral Stance
India Continues To Outperform
Despite the uncertain external environment, the RBI believes the domestic economy has held up better than expected.
Governor Malhotra noted that economic activity during the April-June quarter exceeded the central bank’s earlier expectations. Consumption remained healthy, manufacturing activity continued to expand, services maintained strong momentum and exports recovered, helping India retain its position as the world’s fastest-growing major economy.
The RBI also pointed to sustained government spending on infrastructure, resilient investment activity and robust bank credit as factors supporting growth.
Also Read : RBI Upgrades FY27 GDP Forecast, Cuts Inflation Outlook: What It Means For India’s Economy
GDP Forecast Raised
Reflecting this resilience, the central bank raised its FY27 GDP growth estimate to 6.7 per cent, marginally higher than the 6.6 per cent projected in June.
The revised quarterly projections are:
Q1 FY27: 7.0% (Earlier: 6.6%)
Q2 FY27: 6.4% (Earlier: 6.3%)
Q3 FY27: 6.5% (Unchanged)
Q4 FY27: 6.8% (Unchanged)
The RBI expects investment activity to remain supported by high capacity utilisation, healthy credit growth and continued public infrastructure spending. It also expects services exports and recently signed trade agreements to provide additional support to economic activity.
Inflation Still A Concern, But The Outlook Has Improved
Although the RBI lowered its FY27 inflation projection to 5 per cent, Governor Malhotra made it clear that inflation risks have not disappeared.
Headline retail inflation moved back above the RBI’s target in June after remaining below it for more than a year. According to the central bank, the increase has largely been driven by higher food and fuel prices rather than broad-based demand pressures. Encouragingly, core inflation has remained relatively contained, suggesting underlying price pressures have yet to become widespread.
Also Read : RBI MPC Lowers CPI Inflation To 5%, Says El Nino Continues To Be A Major Risk
The revised CPI projections are:
Q2 FY27: 4.7% (Earlier: 5.1%)
Q3 FY27: 5.9% (Unchanged)
Q4 FY27: 5.5% (Earlier: 5.4%)
The Risks Haven’t Gone Away
Even as it upgraded growth and lowered inflation forecasts, the RBI avoided sounding overly optimistic.
The central bank warned that renewed hostilities in West Asia, elevated energy prices, global trade uncertainty and weather disruptions linked to El Niño continue to pose meaningful risks.
A deficient and uneven south-west monsoon could weigh on agriculture and rural consumption, although government measures such as crop diversification, climate-resilient farming and adequate foodgrain stocks are expected to soften the impact.
Banking System Remains Comfortable
The RBI said liquidity conditions remain comfortable, with the banking system continuing to operate in surplus. Credit growth has remained strong across retail, industry and services despite some moderation in the transmission of lower policy rates.
The central bank also highlighted improvements in India’s external position, with healthy foreign direct investment inflows, a rebound in portfolio investments and foreign exchange reserves remaining adequate to cushion external shocks.
Other Key Announcements
Apart from the policy decision, the RBI announced draft guidelines for restarting the licensing of Urban Cooperative Banks, proposed changes to the credit monitoring framework for rural cooperative banks and said it plans to standardise the regulatory framework governing lending rates across regulated entities to improve transparency and consumer protection.
