By Samannay Biswas

Copyright timesnownews

The Reserve Bank of India (RBI) on Wednesday kept the benchmark repo rate steady at 5.50%, maintaining a neutral policy stance for the second straight meeting. At the same time, the central bank struck a more optimistic tone on growth, raising India’s FY26 GDP forecast to 6.8% from the earlier 6.5% and lowering the inflation projection to 2.6%. Policy Highlights Repo rate: Unchanged at 5.50%Standing deposit facility (SDF) rate: 5.25%Marginal standing facility (MSF) & Bank rate: 5.75%FY26 GDP forecast: Raised to 6.8% (from 6.5%)FY26 inflation forecast: Lowered to 2.6% (from 3.1%) Announcing the decision after the Monetary Policy Committee’s (MPC) fourth meeting of the fiscal year, RBI Governor Sanjay Malhotra said the vote to hold rates was unanimous. Why the Pause? The RBI had cut rates three times earlier in 2025 — in February, April, and June — bringing the repo rate down from 6.5% to 5.5%. Since then, policymakers have opted to pause, citing: Stable inflation: Falling food prices and GST rationalisation are helping cool inflationary pressures.Healthy domestic demand: Strong consumer spending and investment are driving growth momentum.Global uncertainty: Trade tensions, U.S. tariffs, and visa-related policy changes continue to cloud the outlook. Growth and Inflation Outlook The revised GDP forecast of 6.8% reflects confidence in India’s resilience, supported by robust services exports and government spending.The cut in inflation forecast to 2.6% signals improving price stability, giving room for potential future rate cuts if growth risks rise.However, RBI warned that global tariffs, supply chain disruptions, and weaker exports could offset some gains. GST Changes to Boost Spending Governor Malhotra underlined that recent GST rate rationalisation could encourage consumption while easing price pressures. “Rationalised GST rates will help improve affordability and increase demand, while also reducing inflation in the coming quarters,” he noted. Global Factors in Play The RBI is monitoring external risks closely, including: US H-1B visa fee hikes and the HIRE Act, which may affect jobs and remittances from overseas workers.Global tariff wars, which could hurt India’s export competitiveness.Volatile crude oil prices, a key driver of India’s import bill and inflation.Inflation projected at 2.6% for FY26: Q2: 1.8% Q3: 1.8% Q4: 4.0% Q1FY27: 4.5% GDP Growth For FY26 Revised at 6.8% Q2: 7% Q3: 6.4% Q4: 6.2% Market and Business Impact Equity markets welcomed the RBI’s cautious optimism, with investors reassured by stability in interest rates. For businesses and borrowers, the status quo means lower lending rates will continue, aiding investment and housing demand. The RBI stressed that its stance remains “data-dependent”, and it stands ready to adjust policy if inflation or growth diverges from expectations. For now, India’s economy enters the second half of FY26 with stable rates, lower inflation, and a stronger growth outlook.