In its August 2025 policy review, the Reserve Bank of India (RBI) held the repo rate steady at 5.5%, maintaining a neutral stance, despite consumer inflation dropping to a 77-month low of 2.1% in June.
The RBI noted that recent rate cuts totaling 100 basis points are still working their way through the economy, and global uncertainties—including the 25% U.S. tariffs on Indian imports—warrant a cautious approach.
The RBI retained its GDP growth forecast for FY26 at 6.5%, and projected 6.6% for FY27, with quarterly growth for FY26 ranging between 6.3% and 6.7%. Governor Sanjay Malhotra said the risks remain “evenly balanced” and noted continued resilience in rural demand and a gradual recovery in urban consumption.
On inflation, the FY26 CPI forecast was revised down from 3.7% to 3.1%, while FY27 inflation is expected to reach 4.9%, slightly above the RBI’s 4% target. Malhotra said the inflation impact of U.S. tariffs may be limited due to India’s reliance on domestic, non-tradable items, reports the news agencies.
Additional updates include India’s forex reserves climbing to $698.19 billion, the highest in 11 months, and strong gross FDI inflows despite net outflows. Bank credit grew at 12.1% in FY25, with a reduction in non-food credit flow but a rise in total financial resources to the commercial sector.
The RBI also made three consumer-centric announcements: re-KYC drives for Jan-Dhan account holders, simplified claim settlements for deceased customers, and the expansion of the Retail Direct platform to include systematic investment in treasury bills.
