Our Bureau
Mumbai
The Reserve Bank of India’s Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, opted to keep the benchmark repo rate unchanged at 5.25% on Friday, maintaining a neutral stance after a series of 125 basis-point cuts since early 2025. This pause underscores the central bank’s confidence in robust domestic demand and economic momentum, even as it nudged up near-term inflation forecasts slightly higher.
The decision, announced at the end of the MPC’s February 4-6 deliberations, reflects balanced risks with inflation contained below the 4% midpoint target and GDP growth projections upgraded for FY27’s initial quarters. Q1 FY27 CPI inflation is now pegged at 4% (up from 3.9%), and Q2 at 4.2% (from 4%), driven by evolving price dynamics in food and commodities despite benign core inflation holding steady at 2.6%. FY26 GDP growth remains at 7.4%, with Q1 FY27 revised to 6.9% and Q2 to 7%, fueled by resilient corporate earnings, trade deals, and strong external buffers against global volatility.
Governor Malhotra highlighted the transmission of prior easing still underway, justifying the hold as markets absorb liquidity. MSF and bank rates stay at 5.50%, bolstering policy continuity. The RBI also expanded MSME support measures, including credit guarantees, to sustain small business momentum amid uneven sectoral recovery.
Economists view the move as pragmatic, aligning with forecasts of no further cuts soon. “Growth holds up, but inflation’s gradual firming raises the bar for easing,” noted analysts, pointing to incomplete transmission and fading base effects. Equity markets reacted mildly positive, with banking stocks gaining on stable liquidity outlook.
This policy pivot prioritizes vigilance over stimulus, positioning India’s economy for sustained 7%+ expansion in a fluid global landscape. As FY27 unfolds, the MPC’s neutral footing offers flexibility for calibrated responses.
