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🇮🇳 India /Economy & Trade

RBI Holds Rates Steady, Unveils Measures to Boost Foreign Capital Inflows

From Hindustan Times · () English

Translated from English, summarized and contextualized by DistantNews.

At a glance

News Named sources New plan
  • The Reserve Bank of India's Monetary Policy Committee maintained the repo rate at 5.25% and kept its stance neutral.
  • The central bank revised its growth forecast downward to 6.6% and increased its inflation forecast to 5.1% for the fiscal year.
  • RBI also announced measures to attract more foreign capital into the economy.

The Reserve Bank of India's Monetary Policy Committee (MPC) decided to hold the key policy rate steady at 5.25% and maintained its neutral monetary policy stance on Friday. This decision comes even as the committee adjusted its economic outlook, reducing the growth forecast while increasing the inflation projection for the current fiscal year.

As the West Asia conflict prolongs without any meaningful resolution in sight, risks to both inflation and growth have increased.

— Monetary Policy Committee ResolutionThe MPC resolution noted the impact of the ongoing West Asia conflict on economic risks.

The MPC's projections now anticipate the Indian economy will grow at 6.6% in 2026-27, with an inflation rate of 5.1%. These figures represent a downward revision of 30 basis points for growth and an upward revision of 50 basis points for inflation compared to the April forecasts. The committee cited the ongoing conflict in West Asia as a primary reason for the adverse movement in the growth-inflation balance, noting that risks to both inflation and growth have increased as the conflict prolongs.

while the economy has withstood the conflict spillovers with limited impact so far; the strains are increasingly becoming visible.

— Monetary Policy Committee AssessmentThe MPC assessed the growing visibility of economic strains despite initial resilience to conflict spillovers.

Quarterly growth projections have been adjusted downwards across the year, reflecting the continued economic headwinds from the West Asia conflict. Inflation is expected to remain within the Reserve Bank of India's target band of 4%-6%. The MPC highlighted that core inflation remains benign, suggesting that demand pressures in the economy are contained.

continue to remain data dependent

— Monetary Policy CommitteeThe MPC reiterated its approach to future policy decisions.

In addition to its monetary policy decisions, the RBI announced several measures aimed at attracting more foreign capital into India. Analysts view these actions as a strategic approach to address external sector challenges while the interest rate policy focuses on managing the growth-inflation dynamic. The committee reiterated its commitment to remaining data-dependent in future policy decisions, closely monitoring supply shocks from geopolitical events and weather patterns like a weaker-than-normal monsoon.

demand pressures remain contained

— Monetary Policy CommitteeThe committee expressed comfort with the state of demand pressures in the economy.
DistantNews Editorial

Originally published by Hindustan Times in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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