RBI holds repo rate, pegs FY27 GDP growth at 6.9%

The Reserve Bank of India (RBI) on Tuesday kept the repo rate unchanged, holding it at the existing level for the fourth consecutive policy review. The decision, announced by the Monetary Policy Committee (MPC), aligns with market expectations as the central bank continues to prioritise inflation control while supporting growth.

The MPC voted to maintain the status quo, keeping the repo rate at its current level. The reverse repo rate and other policy rates also remain unchanged. The central bank retained its accommodative stance, signalling that it is in no hurry to tighten monetary conditions despite rising price pressures.

RBI Governor, in his statement, emphasised that the decision was taken after a detailed assessment of domestic and global macroeconomic conditions. He noted that while growth remains resilient, inflation risks persist, particularly from food prices and global commodity markets.

GDP growth projection at 6.9%

The RBI projected India's real GDP growth for the current fiscal year at 6.9%. This is a slight upward revision from the earlier estimate, reflecting stronger-than-expected economic activity in the first quarter. The central bank attributed the uptick to robust domestic demand, improving investment cycle, and resilient services sector.

However, the RBI cautioned that global headwinds, including slowing world trade and geopolitical tensions, could weigh on exports. The projection assumes normal monsoon and no major supply-side shocks. The central bank also flagged that the growth path will be uneven, with rural demand still recovering gradually.

Inflation outlook and risks

On inflation, the RBI retained its projection of 4.5% for the current fiscal, assuming a normal monsoon. The MPC noted that food inflation has moderated but remains volatile. Core inflation, which excludes food and fuel, has remained sticky, adding to concerns.

The central bank reiterated its commitment to bringing inflation durably within the 2-6% tolerance band. It said that any premature easing could undo the progress made so far. The RBI also highlighted the need to monitor the pass-through of global commodity prices to domestic inflation.

Market and economic reactions

Bond yields eased marginally after the announcement, as the status quo was largely expected. Banking stocks remained stable, with analysts viewing the decision as neutral. The rupee held steady against the dollar in early trade.

Economists said the RBI's cautious stance is justified given the uncertain global environment. They noted that the central bank has room to cut rates later in the year if inflation moderates and growth falters. The next policy review is scheduled for October.

The RBI's decision comes at a time when several global central banks are either holding rates or signalling a pause. The US Federal Reserve has also kept rates unchanged in its recent meetings, citing mixed economic data. This provides some breathing room for emerging markets like India.

The central bank's forward guidance will be closely watched in the coming months. With inflation expected to remain near the upper end of the target, the RBI is likely to stay data-dependent. Any unexpected spike in food or fuel prices could force a rethink.

For now, the stance remains accommodative, but the door is open for future action. The RBI has made it clear that it will act decisively if required. The next few months will determine whether the current pause extends or gives way to a rate cut.