Mumbai, Aug 5 (NVI): The Reserve Bank of India (RBI) kept the Repo Rate unchanged at 5.25 per cent as it announced the quarterly Monetary Policy (MPC) today and forecast that the country is expected to have the economic growth of 6.7 per cent in the current financial year 2026-27.
Announcing the policy decisions, RBI Governor Sanjay Malhotra said the headline inflation has shot up as per expectations as he referred to the high crude oil prices amid the ongoing Iran war.
However, FY27 retail inflation estimate has been reduced from 5.1 per cent earlier to 5 per cent.
The RBI had also retained the Standing Deposit Facility (SDF) rate at 5 per cent, while keeping the Marginal Standing Facility (MSF) rate and the bank rate unchanged at 5.5 per cent.
According to RBI forecast, the real GDP for current Financial Year 2026-27 would be 6.7 per cent, up from 6.6 per cent projected earlier.
“Growth, although resilient, is expected to be lower in this financial year. The outlook, however, is hazy because of the uncertainties regarding South’s global trade policy. There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action,” he said.
“Realised inflation in the first quarter remained marginally lower than projections, reflecting the limited pass-through of cost pressures… Headline inflation is projected to increase, primarily due to supply-side pressures from food and fuel, while core inflation remains moderate and is expected to decline after peaking in Q3… Excluding precious metals, underlying inflation continues to remain benign and is in line with earlier projections,” he said.
On impact of the Iran war, the RBI Governor said, “The re-escalation of the (Iran) conflict since the first week of July has amplified volatility in energy prices. Early results of corporates for Q1 indicate healthy performance in the manufacturing sector… Private consumption continued to be driven by buoyant discretionary spending. Overall, the Indian economy performed better than expected in Q1.”
Regarding the ongoing Monsoon, he said, “The impact of El Nino on the temporal and spatial distribution of rainfall remains a major risk. Global oil prices have also remained highly volatile, with sharp two-way movements triggered by geopolitical developments, blurring the near-term inflation outlook… While generalised inflation pressures remain modest so far, the risk of second-round effects from higher food, fuel and other input costs translating into broader-based inflation persists.” (NVI)
