The Reserve Bank of India’s Monetary Policy Committee voted unanimously to keep the policy repo rate unchanged at 5.25 per cent at its 62nd meeting held from August 3 to 5, 2026.
The meeting was chaired by RBI Governor Sanjay Malhotra. All six MPC members voted in favour of maintaining the repo rate. The committee also decided to continue with a neutral monetary policy stance, giving itself room to respond to incoming data on inflation and growth.
With the repo rate unchanged, the standing deposit facility rate remains at 5.00 per cent. The marginal standing facility rate and the Bank Rate remain at 5.50 per cent.
GDP growth projected at 6.7 per cent for 2026-27
The MPC said the Indian economy has remained resilient despite global uncertainty. It pointed to steady domestic demand in the first quarter of 2026-27, supported by private consumption, investment activity, construction indicators, capital goods output and bank credit.
The RBI projected real GDP growth for 2026-27 at 6.7 per cent. Its quarterly projections are 7.0 per cent for Q1, 6.4 per cent for Q2, 6.5 per cent for Q3 and 6.8 per cent for Q4. Growth for Q1 of 2027-28 has been projected at 7.3 per cent.
The committee said risks to the growth outlook are evenly balanced. It noted support from services activity, GST rationalisation, stable employment conditions, capacity utilisation, credit flow and the government’s infrastructure spending. At the same time, it flagged risks from uneven south-west monsoon conditions, El Niño, energy prices and supply chain pressures.
Inflation seen at 5.0 per cent in 2026-27
CPI inflation rose to 4.4 per cent in June 2026 after remaining below the target for 16 months. The increase was mainly due to higher food and fuel inflation. The RBI said food price pressures were broad-based during May and June, while fuel inflation rose after changes in retail prices following a sharp rise in international energy prices.
Core inflation, which excludes food and fuel, stayed at 3.9 per cent during May and June. Core inflation excluding precious metals was lower, in the 2.3 per cent to 2.5 per cent range during the same period.
For 2026-27, the RBI projected CPI inflation at 5.0 per cent. The quarterly inflation forecast is 4.7 per cent for Q2, 5.9 per cent for Q3 and 5.5 per cent for Q4. Inflation for Q1 of 2027-28 is projected at 5.3 per cent. Core inflation is projected at 4.3 per cent for 2026-27.
The MPC said headline inflation is expected to rise in the near term and peak in Q3 of 2026-27, mainly because of food and fuel. It added that price pressures have not become broad-based so far, but the risk remains that higher food, fuel and input costs could spread more widely.
Why the MPC chose to pause
The committee said there was a need for greater clarity on inflation before taking further policy action. It cited uncertainty around the monsoon, El Niño, geopolitics and global trade policy. The MPC said it would remain watchful and committed to aligning inflation with the target.
The minutes show that members saw the current inflation rise as mainly supply-driven. They also pointed out that growth remains supported by domestic demand, manufacturing, services and exports.
The vote on the resolution was unanimous. Dr. Nagesh Kumar, Saugata Bhattacharya, Prof. Ram Singh, Indranil Bhattacharyya, Dr. Poonam Gupta and Sanjay Malhotra all voted to keep the repo rate unchanged at 5.25 per cent.
Members flag global and domestic risks
Dr. Nagesh Kumar said the economy had shown resilience despite risks from the West Asia conflict, crude oil volatility, trade policy uncertainty and El Niño-related concerns for agriculture. He said there was no case for monetary policy action at the current juncture and supported the neutral stance.
Saugata Bhattacharya said inflation and growth conditions remained clouded by uncertainty. He cautioned that persistent high fuel prices could feed into broader inflation through input costs, but said it was appropriate to wait for more evidence before taking the next policy action.
Prof. Ram Singh said CPI inflation had crossed the 4 per cent target by a small margin, while core inflation remained below 4 per cent. He said the incoming data would be important for understanding second-round effects on inflation.
Indranil Bhattacharyya said high-frequency indicators and early corporate results suggested sustained momentum in industry and services, but below-normal rainfall could affect agriculture and rural consumption. He supported a pause, saying the RBI should wait for risks to show up in inflation prints before acting.
Dr. Poonam Gupta said the outlook for oil and energy availability had improved, while rainfall distribution had also improved in recent weeks. She said a rate hike could become a case during the year if inflation rises as projected, but supported waiting for more data.
Governor Sanjay Malhotra said the economy had performed better than expected in Q1 despite conflict in West Asia and an erratic monsoon. He said evidence of inflation becoming generalised was limited, but added that the RBI would need to watch for signs that food, fuel and other input prices are spreading into wider inflation.
The next MPC meeting is scheduled from October 5 to 7, 2026.
Source: Reserve Bank of India Press Releases.