The Reserve Bank of India (RBI) maintained the Repo Rate at 5.50% with a neutral stance following the October 2025 Monetary Policy Committee meeting, signaling a balanced approach to supporting economic momentum while ensuring financial stability. Reflecting this cautious optimism, the RBI significantly revised India’s GDP growth forecast for FY 2025-26 upwards to 6.8% from 6.5%. This acceleration is underpinned by resilient domestic demand, driven by strong consumption, investments, government spending, and supportive factors like GST 2.0 and rising capacity utilization. Real GDP grew 7.8% in Q1 FY26, marking the fastest pace in seven quarters, fueled by robust investment and consumption.
The optimistic growth outlook is accompanied by a benign inflation forecast, which the RBI lowered to 2.6% for FY 2025–26, down from 3.1%. This moderation follows nine consecutive months of decline, with headline CPI reaching an 8-year low of 1.6% in July 2025, largely due to a prolonged 10.5% food price decline and the deflationary impact of GST rate rationalization. The external sector also showed stability, as the current account deficit narrowed sharply to 0.2% of GDP in Q1 FY26 (from 0.9% a year ago), supported by strong services exports and $35.3 billion in robust remittances.The broader financial environment also reflected resilience. During April–September 2025, Indian equity markets experienced an upward trajectory, with the BSE MidCap (7.7% gain) and SmallCap (12.1% gain) indices significantly outperforming the BSE Sensex (3.9% gain). The Indian Rupee remained one of the least volatile emerging market currencies, buttressed by strong fundamentals and $37.7 billion in Gross FDI inflows during April–July 2025. Global agencies universally affirm India’s growth prospects, highlighting the country’s strong domestic foundations against global challenges.
