Reserve Bank of India Governor Sanjay Malhotra has maintained the repo rate at 5.25% and retained a neutral stance. The Monetary Policy Committee (MPC) delivered a unanimous decision, extending the pause for a second straight meeting.
The Central Bank referred to India’s solid macroeconomic fundamentals but noted global risks and high energy prices as significant challenges driving its cautious stance.
The RBI maintained the repo rate at 5.25 percent. The RBI announced that it would use flexible monetary policy strategies between two data-based approaches, which would be activated under different economic conditions, inflation rates, and economic growth patterns.
According to the RBI, inflation is within the range of its target, with the CPI inflation forecast at 4.6% for FY27. On the basis of quarterly projections, the first quarter is estimated at 4%, followed by 4.4% in the second quarter, rising up to the maximum level of 5.2% in the third quarter, and decreasing to 4.7% in the fourth quarter.
The core inflation figure is 4.4%. Favorable conditions in terms of good production from rabi crops, sufficient water levels in the reservoirs, and adequate food grain inventories are some of the key factors driving the short-term scenario.
While the GDP growth forecast stays at 7.6% year-on-year for FitFY27, it is projected to fall to 6.9% for FY27. The quarterly growth projections for FY27 indicate a Q1 of 6.8%, Q2 of 6.7%, Q3 of 7%, and finally Q4 of 7.2%. This projection is based on the geopolitical and global financial market dynamics.
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The RBI highlighted measures that will make the business environment more favorable and promote participation in the markets. The measures include streamlining board-level regulations and harmonizing supervisory instructions to enhance transparency. MSMEs benefit from eased entry norms for TReDS platforms, making it easier to access funds through trade receivables.
Moreover, the RBI will enhance the money market by enabling non-banks to be involved in the market and raising borrowing limits for primary dealers