The Reserve Bank of India’s Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 5.50% in its August 2025 policy meeting, continuing with a neutral stance on monetary policy. This follows a cumulative 100 basis points rate cut between February and June this year, including a surprise 50 bps cut in the previous meeting.
RBI Governor Sanjay Malhotra highlighted that India’s economic prospects remain bright amid a changing global order, even as rising global trade tensions—particularly tariff-related uncertainties stemming from the U.S.—pose new challenges to monetary policymaking.
GDP growth outlook retained
The central bank has maintained its real GDP growth forecast for FY26 at 6.5%, citing strong underlying economic momentum and healthy domestic demand. The quarterly GDP projections are as follows:
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Q1 FY26: 6.5%
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Q2 FY26: 6.7%
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Q3 FY26: 6.6%
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Q4 FY26: 6.3%
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Q1 FY27: 6.6%
RBI noted that risks to the growth outlook are “evenly balanced,” indicating caution in the face of potential global headwinds.
CPI inflation sharply revised downward
In a significant move, the CPI inflation forecast for FY26 has been lowered to 3.1%, from 3.7% projected in June. This marks a strong shift in the inflation trajectory, with the quarterly projections as follows:
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Q2 FY26: 2.1%
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Q3 FY26: 3.1%
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Q4 FY26: 4.4%
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Q1 FY27: 4.9%
The moderation in inflation is seen as a positive sign, giving the central bank more room to support growth, if needed, in the upcoming quarters.
The RBI emphasized that it will continue to closely monitor evolving macroeconomic and geopolitical developments, including the impact of global tariffs and commodity prices, to guide future policy decisions.
