RBI MPC: Repo rate cut, FY26 GDP seen at 7.3%

What changed at the latest RBI policy

The Reserve Bank of India’s Monetary Policy Committee (MPC) has delivered a 25 basis point repo rate cut while keeping its policy stance neutral, according to details in the provided text. RBI Governor Sanjay Malhotra said geopolitical uncertainties have risen since the last policy meeting, and warned that the war in the Middle East could affect growth momentum. At the same time, he said high-frequency indicators suggest the domestic economy remains resilient. The policy communication also pointed to a clearer pass-through of higher energy prices into retail products, suggesting households and businesses may see cost pressures more directly. The overall impact, the text notes, will depend on the duration of the conflict, the pace of supply chain normalisation, and how the burden is shared among stakeholders.

Repo rate cut, but neutral stance stays

The supplied material consistently mentions a 25 basis point reduction in the policy rate and a decision to maintain a neutral stance. The neutral stance is described as a signal that the central bank remains cautious and wants flexibility to respond to evolving macroeconomic conditions. However, the text contains different reported end-levels for the repo rate after the cut. One part states the repo rate was cut by 25 bps to 5.25%, while another says it was reduced by 25 bps from 6.5% to 6.25%. The key common point across versions is the direction and size of the change, along with the emphasis on retaining policy optionality rather than committing to an easing cycle.

Growth outlook for H1 FY27 adjusted

Governor Malhotra said the Middle East conflict could weigh on growth momentum even as activity remains robust based on high-frequency indicators. In this context, the text says growth projections for the first half of the ongoing fiscal year were changed marginally. One section notes the growth projections for Q1 and Q2 were lowered to 6.9% and 6.8%, compared with the last MPC meeting’s 6.9% and 7.0%. Another portion pegs GDP growth for FY2026-27 at 6.7% for Q1 and 6.8% for Q2. Taken together, the revisions in the supplied material indicate slightly more caution on near-term growth, with the risk narrative tied to geopolitics, energy prices, and supply chain conditions.

FY26 growth forecast raised to 7.3% in one update

The text also includes an update that the RBI raised its GDP growth forecast for FY26 to 7.3%. Separately, another line mentions a projection of 7.4% growth “this year,” attributed to Governor Malhotra in the MPC announcements summary. In addition, one section says the RBI projects GDP growth at 6.7% for FY26 and maintains projections for FY25 at 6.6%. These figures appear in different parts of the provided content and should be read as they are reported there. What remains consistent is the RBI’s message that economic activity is expected to “hold well,” with trade deals seen as supportive in the narrative.

Inflation view and the 4% focus

On inflation, the provided text says headline CPI inflation fell to an all-time low in October 2025, driven by a faster-than-expected correction in food prices. It adds that the inflation decline is supported by a favourable outlook on food prices and the transmission of past monetary policy actions. The RBI’s inflation projections in the text are 4.8% for 2024-25, with Q4 at 4.4%. For 2025-26, inflation is forecast at 4.2%, with quarterly estimates of Q1 at 4.5%, Q2 at 4.0%, Q3 at 3.8%, and Q4 at 4.2%. The governor also indicated the RBI aims to align inflation closer to the 4% mark within the 2-6% band.

Geopolitics, energy prices, and supply chains

The policy narrative links global developments directly to India’s near-term outlook. The text highlights that the full impact of conflict-related disruptions depends on how long the situation lasts, how quickly supply chains normalise, and how costs are shared. It also states that higher energy prices are increasingly passing through into retail products. Another segment notes that services exports are expected to remain strong, while merchandise exports face headwinds, with external uncertainties posing downside risks. One MPC member, Shashanka Bhide, also flagged slow global demand recovery and supply chain disruptions as risks if geopolitical conflicts are not resolved quickly.

Monsoon deficiency risk and rural demand

The supplied content flags a projected deficiency in the southwest monsoon as a key domestic risk, with implications for agriculture output and rural demand. It also notes that government programs and initiatives are expected to mitigate the impact. These include crop diversification, water harvesting and conservation, climate-resilient practices, and short-duration crops. The same set of points underscores that food inflation outcomes and rural demand can be sensitive to weather, while mitigation measures can reduce the severity of shocks.

Key numbers and projections at a glance

Why the update matters for markets and businesses

For investors and businesses, the combination of a rate cut and a neutral stance points to a balancing act between supporting growth and keeping inflation on track. The text repeatedly links the near-term risk assessment to geopolitics, crude and energy-related price pressures, and trade uncertainty. It also highlights the importance of food prices and weather-related risks for inflation and rural demand. The RBI’s emphasis on flexibility suggests future decisions will be taken meeting by meeting as fresh data on growth, inflation, and global conditions emerges.

What to watch next

The content indicates that the RBI is watching the evolution of global conflict, supply chain normalisation, and energy price pass-through into retail inflation. Domestically, the southwest monsoon outcome and its effect on agriculture production and rural demand remain a key variable. The governor’s remarks also suggest the RBI will continue to focus on price stability while supporting growth, aiming for inflation alignment closer to 4% over time. Further MPC meetings, updated projections, and incoming inflation and growth prints will determine how quickly policy settings change from here.