NEWS – The Reserve Bank of India (RBI), in its August 2025 policy meet, kept the repo rate steady at 5.5%, halting a streak of three consecutive rate cuts totaling 100 basis points.

HIGHLIGHTS

• Inflation Projection Lowered: The Consumer Price Index (CPI) inflation forecast for FY26 has been revised downward to 3.1% from 3.7%, reflecting a more benign price outlook.

GDP Outlook and Economic Resilience

• Growth Forecast Maintained: Despite global trade uncertainties, RBI has retained FY26 real GDP growth at 6.5%, citing strong domestic fundamentals.
• Quarterly Growth Estimates: RBI projects GDP growth at:
  • 6.5% (Q1 FY26)
  • 6.7% (Q2)
  • 6.6% (Q3)
  • 6.3% (Q4)
  • 6.6% in Q1 FY27

Inflation Insights

• Subdued Price Pressures: Quarterly inflation projections were trimmed significantly, with Q2 FY26 at 2.1% and Q3 at 3.1%.
• Long-Term Risks: Retail inflation may rise in Q1 FY27 due to base effects, policy actions, and weather shocks.
• Limited Tariff Impact: RBI downplayed inflation risks from tariffs, noting that food and non-tradables, which dominate India’s CPI, are largely shielded from global shocks.