Sanjay Malhotra, Governor, RBI
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) unanimously voted to keep the policy repo rate unchanged at 5.25 per cent and retained its “neutral” monetary policy stance, citing uncertainties around the south-west monsoon, El Nino conditions, geopolitical developments and global trade policy.The decision, taken during the MPC meeting marks the fourth consecutive policy review in which the repo rate has remained unchanged. The committee has also maintained its neutral stance for the seventh straight meeting.Alongside the policy decision, the RBI revised its FY27 consumer price index (CPI)-based inflation forecast downward to 5.0 per cent from 5.1 per cent, while raising its real GDP growth projection marginally to 6.7 per cent from 6.6 per cent.Addressing the post-policy press conference, RBI Governor Sanjay Malhotra said the central bank does not see itself as either dovish or hawkish.“We feel that this is the right policy rate for the growth-inflation dynamics that we are in today and the outlook that we have projected. There is a lot of uncertainty, which will, of course, play out. The monetary policy framework is very clear.“I don’t think there should be any confusion about the framework. Our target is headline inflation. It is not core inflation, excluding precious metals. We will continue to be guided by headline inflation, and it is our endeavour to bring headline inflation in line with the 4 per cent target.”Malhotra said the projected rise in inflation is expected to stem largely from food and fuel-related supply-side pressures rather than broad-based demand pressures. He added that while economic growth remains resilient, it is likely to moderate in FY27.Weather conditionsThe Governor stressed that uncertainties surrounding weather conditions, geopolitics and global trade warrant caution before any policy action is considered. Any future move, he said, would need to reflect evolving growth-inflation dynamics and the normalisation of underlying inflation.Despite the slight reduction in the RBI’s FY27 inflation forecast, inflation is expected to remain above 5 per cent for much of the year. The central bank projects CPI inflation to peak at 5.9 per cent in the third quarter (October-December), close to the MPC’s upper tolerance limit of 6 per cent, before easing to 5.5 per cent in the fourth quarter (January-March).Economists remain divided on the likely policy response if inflation remains elevated. Gaura Sengupta, Chief Economist at IDFC FIRST Bank, said, “The RBI’s constructive growth outlook and easing inflation risks support an extended pause in rates through FY27.” In contrast, Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, expects scope for 50 basis points of rate hikes in the second half of FY27, particularly as inflation in the first quarter of FY28 is also projected to stay above 5 per cent.”For the first quarter of FY28, the RBI has projected CPI inflation at 5.3 per cent and real GDP growth at 7.3 per cent, with risks seen as evenly balanced.On the external sector, Malhotra warned that slower global trade growth, higher energy prices and continuing trade policy uncertainties could widen India’s current account deficit in FY27. However, the Governor said the India-UK trade agreement, other recent trade pacts, strong services exports and robust remittance inflows should help offset some of these risks.Published on August 5, 2026
