RBI Keeps Repo Rate Unchanged at 5.25 Percent; Forecasts 6.9 Percent Real GDP Growth for 2026-27

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) held its 60th meeting from April 6 to 8, 2026, keeping the policy repo rate unchanged. The committee voted unanimously to maintain the policy repo rate under the liquidity adjustment facility (LAF) at 5.25 per cent. Consequently, the standing deposit facility (SDF) rate remains at 5.00 per cent, while the marginal standing facility (MSF) rate and the Bank Rate stand at 5.50 per cent. The MPC also opted to continue with a neutral stance.

Global and Domestic Economic Outlook​

The MPC's assessment incorporated a review of evolving macroeconomic and financial developments, considering both global and domestic headwinds.

Globally, the conflict in West Asia presents a significant challenge, causing severe disruption to global supply chains. This environment suggests higher global prices and slower growth, forcing monetary policy to navigate a difficult trade-off between anchoring inflation expectations through policy tightening and minimizing the impact on forgone growth. Sovereign bond yields have hardened due to inflation fears, and equity valuations have corrected. The US dollar has rallied due to safe-haven demand stemming from global financial market turmoil. Key downside risks globally include the conflict's intensification, prolongation, and wider geographical spread.

Domestically, the Indian economy showed resilience in 2025-26, with real gross domestic product (GDP) estimated to grow by 7.6 per cent year-on-year (y-o-y) according to the Second Advance Estimates (SAE) of the new GDP series (base year 2022-23). Private consumption and fixed investment were significant contributors to overall growth, although net external demand remained soft. Real GVA growth of 7.7 per cent on the supply side was supported by a buoyant services sector and strong manufacturing activity.

Growth and Inflation Projections for 2026-27​

For the 2026-27 fiscal year, real GDP growth is projected at 6.9 per cent. The quarterly projections are as follows:


Inflation projections also indicate a moderate trajectory. The CPI inflation for 2026-27 is projected at 4.6 per cent. The quarterly CPI inflation forecast is:


The committee noted that headline inflation increased to 3.2 per cent in February 2026 from 2.7 per cent in January, primarily due to unfavorable base effects, while food inflation rose in February. Core inflation (excluding food and fuel) remained muted, posting moderate readings at 2.1 per cent in January and February, suggesting underlying inflation pressures remain subdued.

Risks and Forward Guidance​

Looking ahead, elevated energy and commodity prices, alongside supply shocks stemming from disruptions in the Strait of Hormuz, are anticipated to act as a drag. Heightened volatility in global financial markets and the conflict's impact on freight and insurance costs pose risks to growth prospects.

Despite these risks, continued support for domestic demand is expected from the services sector, GST rationalization, increased capacity utilization in manufacturing, and healthy balance sheets across financial institutions and corporates. The Government's focus on scaling up domestic manufacturing sectors announced in the Union Budget 2026-27 is viewed positively for India's growth trajectory.

The MPC stated that while geopolitical uncertainties add risk to both inflation and growth, the fundamentals of the Indian economy provide greater resilience. Given the supply shock environment, the committee determined it was prudent to wait and watch the evolving circumstances, maintaining vigilance while keeping the policy rate unchanged and adhering to a neutral stance to allow for judicious responses to incoming information.

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