The Reserve Bank of India’s Monetary Policy Committee (MPC) has started its three-day review session, with markets anticipating a 25-basis-point reduction in interest rates. However, several analysts believe the central bank could choose to maintain the existing rate instead of easing policy.
The outcome of the meeting, chaired by RBI Governor Sanjay Malhotra and comprising six members, will be declared on Friday. The discussions come at a time when inflation continues to fall, GDP growth remains strong, the rupee has crossed 90 per US dollar, and geopolitical concerns persist.
Earlier this year, the RBI cut the repo rate by 100 basis points in three rounds starting February, supported by easing inflation trends.
Crisil Chief Economist Dharmakirti Joshi said, "We anticipate a 25-basis point cut in the repo rate in December. While growth remains robust, a significant decline in retail inflation in October has created additional room for this adjustment."
Even Governor Malhotra had recently indicated that there is scope to further reduce policy interest rates.
Retail inflation based on the Consumer Price Index (CPI) has remained below the 2% lower tolerance band set by the government for the last two months. At the same time, India reported an 8.2% GDP growth rate in the second quarter, beating expectations.
Possibility of Status Quo
Despite improving inflation and growth numbers, some economists believe the RBI may extend its pause on rate cuts, given the strong economic momentum supported by public investment, fiscal discipline, and reforms such as GST rate reductions.
Bank of Baroda Economist Aditi Gupta said the RBI’s MPC is likely to keep the repo rate unchanged at 5.50% while retaining a neutral stance during the December 2025 review.
She added that strong GDP growth and easing inflation give RBI room to pause rates as it monitors global uncertainties.
The central government’s mandate requires inflation to be maintained at 4%, with a ±2% tolerance range.
Growth Outlook Likely to Be Revised Upward
The RBI is expected to raise its GDP growth forecast on the back of better-than-estimated first-half results. In October, the Reserve Bank had already upgraded growth estimates to 6.8%, up from the earlier 6.5% projection for the current fiscal year.
With 8% growth in the first half, India appears positioned to surpass the FY26 annual target of 6.3–6.8%, as projected in the Economic Survey released in January.
[With PTI inputs]
The outcome of the meeting, chaired by RBI Governor Sanjay Malhotra and comprising six members, will be declared on Friday. The discussions come at a time when inflation continues to fall, GDP growth remains strong, the rupee has crossed 90 per US dollar, and geopolitical concerns persist.
Earlier this year, the RBI cut the repo rate by 100 basis points in three rounds starting February, supported by easing inflation trends.
Crisil Chief Economist Dharmakirti Joshi said, "We anticipate a 25-basis point cut in the repo rate in December. While growth remains robust, a significant decline in retail inflation in October has created additional room for this adjustment."
Even Governor Malhotra had recently indicated that there is scope to further reduce policy interest rates.
Retail inflation based on the Consumer Price Index (CPI) has remained below the 2% lower tolerance band set by the government for the last two months. At the same time, India reported an 8.2% GDP growth rate in the second quarter, beating expectations.
Possibility of Status Quo
Despite improving inflation and growth numbers, some economists believe the RBI may extend its pause on rate cuts, given the strong economic momentum supported by public investment, fiscal discipline, and reforms such as GST rate reductions.
Bank of Baroda Economist Aditi Gupta said the RBI’s MPC is likely to keep the repo rate unchanged at 5.50% while retaining a neutral stance during the December 2025 review.
She added that strong GDP growth and easing inflation give RBI room to pause rates as it monitors global uncertainties.
The central government’s mandate requires inflation to be maintained at 4%, with a ±2% tolerance range.
Growth Outlook Likely to Be Revised Upward
The RBI is expected to raise its GDP growth forecast on the back of better-than-estimated first-half results. In October, the Reserve Bank had already upgraded growth estimates to 6.8%, up from the earlier 6.5% projection for the current fiscal year.
With 8% growth in the first half, India appears positioned to surpass the FY26 annual target of 6.3–6.8%, as projected in the Economic Survey released in January.
[With PTI inputs]
