RBI MPC December: India To Grow Faster Than Earlier Thought, Central Bank Now Expects 7.3% GDP In FY26
The MPC maintained its neutral policy stance, signalling that the central bank remains cautiously optimistic but not yet ready to declare a firm pivot towards an easing cycle.
- RBI cuts repo rate by 25 basis points to 5.25%.
- Monetary Policy Committee keeps neutral stance, signals caution.
- GDP growth forecast for FY26 raised to 7.3%.
The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday delivered a widely anticipated 25‑basis‑point rate cut, lowering the repo rate to 5.25 per cent.
The move, unanimously approved by the six‑member panel, comes at a moment when inflation is at record lows and economic growth has accelerated to its fastest pace in six quarters.
Alongside the rate decision, the MPC maintained its neutral policy stance, signalling that the central bank remains cautiously optimistic but not yet ready to declare a firm pivot towards an easing cycle.
RBI Upgrades GDP Estimates
In a major update to its macroeconomic projections, the MPC raised its GDP growth forecast for FY2025–26 to 7.3 per cent, up from 6.8 per cent estimate shared in the October meeting, marking an upward revision of about half a percentage point.
Malhotra outlined the quarterly projections as follows.
| Quarter | Earlier | Now |
| Q3FY26 | 6.4% | 7% |
| Q4FY26 | 6.2% | 6.5% |
For the upcoming financial year (FY2026–27), the central bank pegs GDP growth at 6.7 per cent for Q1 FY27 and 6.8 per cent for Q2 FY27.
The governor said, “Services exports are expected to remain strong while merchandise exports face headwinds, with external uncertainties posing downside risks. Taking all factors into account, real GDP growth for this year is projected at 7.3 per cent, up from earlier estimates. Headline CPI inflation fell to an all-time low in October 2025, driven by a faster-than-expected correction in food prices.”
MPC Continues With 'Neutral' Stance
Announcing the decision, Governor Malhotra said, “The MPC also decided to continue with a neutral stance. In view of evolving liquidity conditions, the Reserve Bank will conduct OMO purchases of government securities worth Rs 1 lakh crore and a three‑year rupee buy-sell swap of 5 billion US dollars this December to inject durable liquidity into the system.”
He added that headline inflation "has eased significantly and is likely to remain softer than earlier projections," giving the MPC more room to manoeuvre.
The three‑day policy deliberations began on Wednesday at a critical juncture. With retail inflation at its lowest monthly reading on record and growth displaying notable resilience, markets had entered the week speculating whether the RBI would resume monetary easing after holding rates steady for four consecutive meetings.
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