The Reserve Bank of India (RBI) concluded its 57th Monetary Policy Committee (MPC) meeting on October 1, 2025, by maintaining the Repo Rate at 5.50% with a neutral stance, signaling a balanced focus on economic growth and financial stability. This decision comes as the RBI significantly revised India’s GDP growth forecast for FY 2025-26 upwards to 6.8% from its earlier 6.5% estimate. The central bank’s optimism is driven by strong domestic demand, evidenced by a 7.8% real GDP growth in Q1 FY26—the fastest pace in seven quarters—led by robust investment and consumption, buoyant rural and urban consumer optimism, and supportive structural reforms like GST 2.0.
The growth momentum is further supported by a benign inflation outlook, allowing the RBI to lower its CPI inflation forecast for FY 2025–26 to a remarkably low 2.6%, down from 3.1%. This downward revision follows nine consecutive months of declining headline inflation, which hit an 8-year low of 1.6% in July 2025, largely driven by a steep, prolonged 10.5% food price decline and the deflationary effects of recent GST rate rationalization on a wide range of goods. The stability in prices and a narrower current account deficit of 0.2% of GDP in Q1 FY26—bolstered by strong services exports and the world’s largest private remittances—underscore the strength of India’s macroeconomic fundamentals.Amidst these positive domestic indicators, Indian equity markets, particularly the MidCap (7.7% gain) and SmallCap (12.1% gain) indices, outperformed the benchmark BSE Sensex (3.9% gain) in the April-September period of FY26. The Indian Rupee also exhibited resilience, being one of the least volatile emerging market currencies, supported by robust Gross FDI inflows of $37.7 billion. Global agencies like Fitch and OECD have reaffirmed India’s strong growth prospects, cementing broad confidence in the economy’s ability to maintain a high-growth trajectory despite persistent global uncertainties like tariff wars and geopolitical tensions.
