Today, RBI conducted its first MPC meeting of FY26, and as most expected, the central bank slashed the repo rate further, cutting it by 25 bps. RBI Governor Sanjay Malhotra said that the entire RBI Monetary Policy Committee (MPC) voted for the rate cut unanimously. So now the repo rate stands at 6% down from the previous 6.25%. This has been the second rate cut in the calendar year 2025. What else changed in the RBI MPC meeting? Let’s find out.
GDP Growth Prospects
In the RBI MPC meeting, the GDP growth has been projected at 6.5% for the Fiscal year 2025-26, which has been further segregated according to the quarters. So, the projections for individual quarters are as follows –
- FY26 Q1 – 6.5%
- FY26 Q2 – 6.7%
- FY26 Q3 – 6.6%
- FY26 Q4 – 6.3%
Going by the sectors, the agricultural sector shows bright prospects in this fiscal as the reservoir levels are now healthy and crop production has increased significantly. Then coming to the manufacturing sector, it is also showing signs of turning around and revival. The manufacturing businesses can expect this fiscal year to offer multiple opportunities and growth. Finally, the service sector is expected to remain resilient this financial year.
The demand outlook for the fiscal year looks promising as rural demand can boost the agricultural sector, while urban demand can boost the consumer discretionary sector. On the other hand, the investment activities have already started increasing, and the entire urban demand is well linked to the increase in the disposable income as per the income tax changes, which came into effect beginning this fiscal on 1 April 2025.
Even though the global scenario is quite uncertain but the domestic demand is here to stay, riding on the increase in government spending especially on infrastructure. While the exports of services probably won’t get hurt much as predicted by the RBI but the merchandise exports may get affected due to the global headwinds.
CPI Inflation
The CPI inflation for the Fiscal 2025-26 has been projected at 4%, which is within the RBI’s inflation target of 2% to 6%. While there are certain uncertainties, the monsoon is predicted to be normal, which can keep the food prices in check. Assuming the same, the quarterly inflation rate forecast given by the RBI is as follows –
- FY26 Q1 – 3.6%
- FY26 Q2 – 3.9%
- FY26 Q3 – 3.8%
- FY26 Q4 – 4.4%
Global economic outlook
While the domestic economic outlook is stable, the global outlook remains uncertain with multiple challenges. Tariffs have become one of the most crucial concerns for economic activities and making the markets uncertain every day. Amidst the uncertainty, this repo rate cut has come as a boon for the domestic investors and businesses.
Source: TheTimesofIndia
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