RBI MPC October: Monetary Panel Reduces Inflation Estimates For FY26, Check Key Figures HERE
According to ICRA, inflation projections inched close to 2.6 per cent for FY26, aligning with the recent Goods and Services Tax (GST) rationalisation.
The Reserve Bank of India's Monetary Policy Committee (MPC) revealed its fiscal policy on Wednesday. Chair Governor Sanjay Malhotra highlighted that the inflation projection for FY2025-26 has been lowered to 2.6 per cent, reflecting the impact of GST rationalisation and benign food prices.
The MPC unanimously opted to maintain the repo rate at 5.5 per cent, keeping the policy stance neutral. This comes after a cumulative reduction of one percentage point earlier in the year, aimed at supporting growth. Quarterly CPI projections for FY2025-26 were revised at 1.8 per cent for Q2, 1.8 per cent for Q3, and 4.0 per cent for Q4, while CPI for Q1 of FY2026-27 is expected at 4.5 per cent.
Domestic Growth Drivers
A favourable monsoon, strong progress in kharif sowing, and adequate reservoir levels have brightened the outlook for agriculture and rural consumption. Buoyant services activity and steady employment conditions are expected to further support domestic demand. GST rationalisation is also anticipated to boost consumption, while rising capacity utilisation and favourable financial conditions should continue to facilitate fixed investment, the governor said.
However, external demand may face headwinds due to ongoing tariff and trade policy uncertainties, he cautioned. Prolonged geopolitical tensions and financial market volatility could also pose risks.
Structural reforms, including GST rationalisation, are expected to partially offset these challenges. Real GDP growth for FY2025-26 is projected at 6.8 per cent, with Q2 at 7.0 per cent, Q3 at 6.4 per cent, and Q4 at 6.2 per cent. Growth for Q1 FY2026-27 is projected at 6.4 per cent, with risks broadly balanced.
Inflation Outlook
Headline CPI inflation reached an eight-year low of 1.6 per cent in July 2025, before rising slightly to 2.1 per cent in August. Food inflation has moderated from its October 2024 peak, fuel prices have remained steady, and core inflation is contained at 4.2 per cent (3.0 per cent excluding precious metals). The outlook for H2 FY2025-26 remains moderate, with GST rationalisation expected to lower prices across key items, keeping overall inflation softer than projected earlier.
Saurabh Bansal, Founder of Finatwork Investment Advisor, a SEBI-registered RIA, noted that: “Headline inflation remains well below the RBI's medium-term target of 4 per cent, with recent tax reforms, especially rationalisation of GST rates, expected to have a further dampening effect. The positive inflation outlook allowed scope for a rate cut but also created room for a cautious approach, given that inflation is near the lower end of the 2–6 per cent target band.”
He added that ongoing global trade disruptions and currency volatility, particularly from new US tariffs and geopolitical strains, were key reasons for the MPC to monitor the full impact on the domestic economy before making further policy moves.
Vimal Nadar, National Director and Head of Research at Colliers India, said: “Maintaining the repo rate at 5.5 per cent and retaining a neutral stance reflects cautious optimism. The upward revision of GDP to 6.8 per cent demonstrates the RBI’s support for a resilient domestic economy while managing inflationary pressures.”
Pramod Kathuria, Founder & CEO of Easiloan, echoed that the status quo on repo rate will help ensure clarity about borrowing costs for homebuyers and businesses.
Implications for Markets and Real Estate
Banks are expected to complete the transmission of the earlier 100 basis points repo rate reduction during the festive season, benefiting homebuyers in affordable and mid-income segments.
GST rationalisation on construction materials like cement may allow developers to offer competitive pricing, supporting housing sales and overall real estate demand, including warehousing, retail, and hospitality sectors.
Related Video
Union Budget 2025: Arvind Kejriwal lists the shortcomings of the Modi government's budget | ABP News | AAP
Top Headlines
