RBI Monetary Policy Meeting Today: RBI lifts GDP forecast, Trims inflation, Cuts repo rate to 5.25% — What changes for FY26?

RBI MPC Meet Latest Update: The Reserve Bank of India (RBI) delivered its bi-monthly monetary policy announcement after the Monetary Policy Committee (MPC) concluded its three-day review. The meeting took place amid easing inflation, firm GDP numbers, a weak rupee, and a volatile geopolitical environment.

The central bank reduced the policy repo rate by 25 basis points, bringing it down to 5.25 per cent, extending the total rate reduction to 100 basis points since February.

RBI Signals Confidence Amid Strong Growth

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The RBI signalled confidence in economic conditions, supported by falling inflation and strong domestic growth momentum.

RBI Governor Sanjay Malhotra noted that India’s macro fundamentals remain stable and that the inflation trajectory has improved significantly.

Inflation Outlook for FY26

The central bank now expects the consumer price index (CPI) inflation in FY26 to be 2.0 per cent, lower than the earlier estimate of 2.6 per cent.

The current CPI reading is below the government-mandated 2 per cent lower tolerance band, reflecting softening price pressures across food, fuel, and core categories.

The RBI also shared quarterly inflation expectations. CPI inflation is projected at 2.6 per cent for FY26, 4 per cent in Q4 FY26, and 4.5 per cent in Q1 FY27. The central bank highlighted that risks to inflation “remain evenly balanced” but acknowledged the role of global uncertainty, commodity prices, and volatile currencies in shaping future movements.

RBI Revises GDP Growth Forecast

On the growth front, the RBI revised its real GDP estimate for FY26 to 7.3 per cent, a 0.5 percentage point increase from earlier projections.

Stronger-than-expected data from the second quarter influenced this upward revision. India registered 8.2 per cent GDP growth in Q2, the highest in six quarters and well above the RBI’s earlier expectation of 6.8 per cent.

Nominal GDP grew 8.7 per cent during the same period, supported by robust manufacturing activity, a pickup in services, and healthy tax collections.

Quarterly GDP Projections

The central bank outlined quarterly GDP growth projections as well. Growth in Q3 FY25 is estimated at 7 per cent, followed by 6.5 per cent in Q4. For the next financial year, real GDP growth is projected at 6.7 per cent in Q1 and 6.8 per cent in Q2, suggesting a steady and broad-based expansion.

Manufacturing growth, which accelerated to 9.1 per cent in the July–September quarter compared with 2.2 per cent a year earlier, continues to be one of the key drivers of the improved outlook.

Liquidity Measures by RBI

The RBI also announced two liquidity-related measures. It will conduct Open Market Operation (OMO) purchases worth Rs 1 lakh crore, aimed at ensuring smoother financial conditions, and will undertake a three-year dollar–rupee buy–sell swap of $5 billion in December to support currency management.

Government Optimism on Economic Trajectory

Government officials have echoed optimism about India’s economic trajectory. Chief Economic Adviser V. Anantha Nageswaran recently stated that GDP growth in FY26 could exceed 7 per cent, potentially pushing the economy beyond the USD 4 trillion mark during the year.

The Economic Survey earlier projected growth in the 6.3–6.8 per cent range for FY26, but the strong first-half performance has raised expectations.