Following the repo-rate increase, the standing deposit facility (SDF) rate stands adjusted to 5.25 per cent, while the marginal standing facility (MSF) rate and the Bank Rate stand at 5.75 per cent. The 63rd meeting of the MPC was held from October 5 to 7, 2026, under the chairmanship of Sanjay Malhotra, governor, Reserve Bank of India (RBI), with Dr. Nagesh Kumar, Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta and Indranil Bhattacharyya attending.
India’s MPC has raised the policy repo rate by 25 basis points to 5.50 per cent and shifted its stance to calibrated tightening after its October 5-7 meeting.
The RBI projected real GDP growth at 7.1 per cent for 2026-27 and CPI inflation at 5.2 per cent.
Q1 GDP growth of 7.8 per cent was supported by consumption, investment, merchandise exports and services exports.
The RBI projected real gross domestic product (GDP) growth for 2026-27 at 7.1 per cent, with quarter 2 (Q2) at 7.2 per cent, Q3 at 6.9 per cent and Q4 at 6.8 per cent. Real GDP growth for Q1 2027-28 is projected at 7.1 per cent, with risks evenly balanced, the Reserve Bank of India said in a release.
Consumer price index (CPI) inflation is projected at 5.2 per cent for 2026-27, with Q2 at 4.9 per cent, Q3 at 6.0 per cent and Q4 at 5.7 per cent. Inflation for Q1 2027-28 is projected at 5.6 per cent, with risks evenly balanced, while core inflation is projected at 4.4 per cent for 2026-27, according to the RBI.
The MPC said the global backdrop remained challenging because of geopolitical developments, but the Indian economy has stayed strong and economic momentum remained broad-based. It said the economy is expected to remain resilient.
As per National Statistics Office estimates, real GDP growth in Q1 2026-27 stood at 7.8 per cent, higher than expected. Growth was supported by strong private consumption and fixed investment, a rebound in merchandise exports and sustained buoyancy in services exports. On the supply side, the manufacturing sector grew at a robust pace, while services activity strengthened further on buoyant domestic and external demand.
Available high-frequency indicators for July-August suggested sustained momentum in domestic economic activity in Q2. Domestic demand remained resilient and was supported by robust external demand, with merchandise exports registering double-digit growth, the RBI said.
Looking ahead, global economic uncertainty is expected to have some bearing on domestic economic activity. Energy prices and supply-chain pressures have continued, but their near-term trajectory remains uncertain amid the West Asia conflict. The adverse impact was being contained by active diversification of supply sources, the release added.
The central bank also flagged risks to the agriculture sector’s outlook and rural demand from a deficient south-west monsoon and strong El Nino conditions, while noting that healthy foodgrain buffers and proactive government policy interventions are expected to mitigate the impact. Continuing momentum in services and broadly stable employment conditions were likely to support urban demand, while strong capacity utilisation, robust credit flows and the government’s thrust on infrastructure were expected to sustain investment activity. Services exports were expected to remain buoyant, and bilateral trade agreements should boost merchandise exports, the RBI said.
On inflation, CPI increased to 4.8 per cent in August 2026 from 4.5 per cent in July. The rise was mainly due to higher inflation in food and fuel groups, while core inflation also picked up, indicating some widening of price pressures.
Core inflation rose to 4.2 per cent in August, while core inflation excluding precious metals rose to 2.9 per cent. The weighted share of items in headline CPI recording inflation above 4 per cent increased steadily to about 37 per cent in August, according to the release.
Since the previous MPC meeting in August 2026, re-escalation of the West Asia conflict and sharp volatility in crude oil prices have kept the global economy in flux. Global growth has remained resilient, but faster inflation in key economies has prompted a shift towards hawkish monetary policy. The US Federal Reserve raised rates by 25 basis points in September, and subsequent Fed commentary, along with tightening by major systemically important central banks, reinforced expectations of higher global policy rates, the RBI said.
Tighter global financial market conditions and fiscal sustainability concerns in major economies are keeping global bond yields at record high levels. With no resolution to the West Asia conflict, the RBI said significant downside risks to the global outlook remain, including further tightening of global financial conditions, continued elevated AI-related asset valuations and high public debt.
Explaining its decision, the MPC said inflation and its outlook were not as benign as last year, with headline CPI inflation expected to average almost 5.8 per cent over the next three quarters and core inflation projected at 4.4 per cent this year. It said recalibrating the policy rate was imperative.
The MPC said the shift to calibrated tightening signals that, under current conditions, rate cuts are off the table in the near term and policy action ahead can only be a rate increase or a pause, depending on evolving conditions and the outlook. The duration and extent of the rate-hike cycle would depend on actual growth-inflation developments and outlook, especially underlying inflation, the extent of broadening price pressures and second-round effects of the supply shock, as well as the impact of demand impulses, the RBI said.
Fibre2Fashion News Desk (KD)
