RBI keeps repo rate unchanged at 5.5%, revises real GDP forecast to 6.8%

RBI Oct MPC meet 2025: The MPC retained the repo rate at 5.5 per cent, increased the growth estimate and revised the inflation forecast for FY26 downward to 2.6 per cent

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The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) on Wednesday kept the repo rate unchanged at 5.5 per cent and maintained the policy stance at ‘neutral’, RBI Governor Sanjay Malhotra announced.

 

Malhotra noted that the effects of the front-loaded monetary policy measures and recent fiscal actions were still unfolding. Highlighting ongoing trade-related uncertainties, he said: “The MPC considered it prudent to wait for the impact of policy actions to play out and for greater clarity to emerge before charting the next course of action.”

 

The MPC unanimously voted to keep the policy repo rate at 5.5 per cent and retain the neutral stance, which had been shifted from ‘accommodative’ during the June MPC meeting.

 

During its October meeting, the committee also revised its growth forecast for FY26 upward to 6.8 per cent while lowering the inflation forecast to 2.6 per cent.

 

Growth revised upwards

 

Noting that India registered strong growth during the first quarter at 7.8 per cent, Malhotra announced that the MPC has increased the growth forecast for FY26 to 6.8 per cent from the earlier 6.5 per cent. Here is the revised forecast:

 

Growth estimates

 

"High frequency indicators suggest that economic activity continues to remain resilient. Rural demand remains strong, riding on a good monsoon and robust agriculture activity, while urban demand is showing a gradual revival," Malhotra said.

 

Growth outlook

 

Governor Malhotra said that the growth outlook remains resilient, supported by domestic drivers, despite weak external demand. "High frequency indicators suggest that economic activity continues to remain resilient. Rural demand remains strong, riding on a good monsoon and robust agriculture activity, while urban demand is showing a gradual revival," Malhotra said. It is likely to get further support from lower inflation, monetary easing and GST reforms, he added.

 

However, Malhotra noted that the growth continues to be below the central bank's aspirations. He highlighted that even though the growth projection is being revised upwards, the forward-looking projections for Q3 and beyond are expected to be slightly lower than projected earlier, primarily due to tariff-related developments, despite being partially offset by the impetus provided by the rationalisation of GST rates.

 

FY26 inflation lowered to 2.6%

 

Noting that the inflation turned even more benign in the last few months, Malhotra said that the MPC has cut its FY26 Consumer Price Index (CPI)-linked inflation forecast from 3.1 per cent to 2.6 per cent. Core inflation for this year and Q1FY27 is also expected to remain contained, the Governor said.

 

Here are the full estimates:

 

Inflation forecast

 

Malhotra said that lowered inflation is primarily due to a reduction in food inflation. He added that the inflation outcome is likely to be softer than what was projected in August, primarily due to GST cuts.

 

Malhotra also highlighted that inflation has remained above their respective targets in some advanced economies, posing fresh challenges for central banks as they navigate the shifting growth-inflation dynamics.