- The Reserve Bank of India kept the policy repo rate steady at 5.25%
- SDF rate set at 5%, MSF and bank rates remain at 5.5%
- Economists expected no repo rate change amid global and domestic uncertainties
The Reserve Bank of India's Monetary Policy Committee (MPC) has unanimously decided to keep the policy repo rate unchanged at 5.25%, in line with the expectations of the vast majority of market observers.
The Standing Deposit Facility (SDF) rate was set at 5%, while the Marginal Standing Facility (MSF) rate and the bank rate stand at 5.5%.
While the economy remains resilient, he flagged incipient stress in certain segments and warned that there are considerable risks surrounding both inflation and growth assessments.
10 economists polled by NDTV Profit had anticipated no change in the benchmark rate, pointing to a broad consensus that the Monetary Policy Committee will extend its pause while assessing evolving global and domestic conditions.
GDP Growth Projections
The RBI revised its real GDP growth forecast for FY27 to 6.6%, down from the earlier projection of 6.9%, reflecting the impact of heightened global uncertainty, geopolitical tensions, supply chain disruptions, and rising energy prices.
On the growth front, Tuhin Kanta Pandey, the RBI governor noted that government capital expenditure is expected to remain robust, while sustained credit flow from banks continues to support corporate investment activity. However, rising costs could dampen investment sentiment and affect future capital spending decisions.
The governor also expressed confidence that services exports will remain resilient despite global uncertainties and highlighted that the government has taken measures to help the economy cope with external shocks.
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Inflation Projections
RBI Governor said external factors continue to pose downside risks to the growth outlook amid elevated geopolitical tensions and global uncertainty. On the inflation front, he noted that fuel inflation remained muted in March and April, while core inflation was stable at 3.7% during the two months.
However, the outlook has worsened due to the sharp rise in crude oil prices, which have averaged around $110 per barrel so far this year. The RBI now expects crude prices to remain materially higher than previously assumed, revising its average crude oil assumption for the year to $87 per barrel.
Reflecting these risks, the central bank has raised its FY27 CPI inflation forecast by 50 basis points to 5.1%, compared with its earlier projection of 4.6%.
On inflation, the governor said CPI inflation remains low at present, though baseline projections indicate that inflation could move closer to the upper tolerance band in the third quarter. He cautioned that the outlook remains clouded by the forecast of a sub-normal monsoon and the possible emergence of El Niño conditions.
Pandey also said that private consumption remains supportive of growth, aided by resilient discretionary spending, while merchandise exports have continued to register growth despite the ongoing geopolitical conflict. However, he noted that the impact of rising cost pressures is becoming increasingly visible across sectors.
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