New Delhi, June 05: The Reserve Bank of India (RBI) on Friday kept the benchmark repo rate unchanged at 5.25%, with the Monetary Policy Committee (MPC) unanimously voting to maintain the current policy rate after assessing evolving domestic and global economic conditions.
The decision was announced by RBI Governor Sanjay Malhotra following the second bi-monthly monetary policy meeting for FY27, held between June 3 and June 5.
RBI Keeps Key Policy Rates Unchanged
Alongside the repo rate decision, the central bank retained other key policy rates:
- Repo Rate: 5.25%
- Standing Deposit Facility (SDF) Rate: 5.00%
- Marginal Standing Facility (MSF) Rate: 5.50%
- Bank Rate: 5.50%
The RBI said the decision reflects a balanced approach amid persistent global uncertainties and evolving domestic economic conditions.
MPC Votes Unanimously
Governor Malhotra stated that the MPC conducted a comprehensive review of macroeconomic and financial developments before arriving at the unanimous decision.
He noted that while India’s economy continues to demonstrate resilience, emerging stress in certain sectors and growing external uncertainties require careful monitoring.
The central bank indicated that risks to both growth and inflation remain elevated due to global geopolitical developments and economic volatility.
RBI Cuts FY27 GDP Growth Forecast to 6.6%
In a significant move, the RBI revised its real GDP growth projection for FY27 downward to 6.6%.
The previous forecast stood at 6.9%.
According to the central bank, the revision reflects concerns arising from:
- Heightened geopolitical tensions
- Global economic uncertainty
- Supply chain disruptions
- Rising energy prices
- External demand challenges
Despite the downgrade, India remains among the fastest-growing major economies globally.
Services Exports Remain a Bright Spot
Governor Malhotra expressed confidence in the resilience of India’s services exports sector.
He noted that exports of IT services, business services, and other service-related activities are expected to continue supporting economic growth despite challenges in the global environment.
The RBI also acknowledged various government initiatives aimed at helping the economy navigate external shocks and maintain macroeconomic stability.
Inflation Outlook Remains Manageable
On inflation, the governor said consumer price inflation (CPI) remains relatively low at present.
Key observations include:
- Fuel inflation remained muted during March and April.
- Core inflation remained stable at 3.7%.
- Inflationary pressures are currently contained.
However, the RBI cautioned that inflation may move closer to the upper tolerance threshold during the third quarter of FY27 based on current projections.
Monsoon and El Niño Pose Inflation Risks
The central bank identified weather-related developments as a major risk factor for inflation.
According to the governor, concerns include:
- Possibility of a sub-normal monsoon
- Potential emergence of El Niño conditions
- Impact on food production and food prices
Any adverse weather event could exert upward pressure on inflation in the coming months.
Consumption Continues to Support Growth
The RBI highlighted that private consumption remains a key driver of economic activity.
According to the governor:
- Consumer spending remains resilient.
- Discretionary spending continues to support demand.
- Domestic economic activity remains broadly healthy.
The central bank also noted that merchandise exports have continued to record growth despite ongoing geopolitical conflicts and disruptions in global trade.
Rising Costs Becoming Visible Across Sectors
While growth remains relatively stable, Malhotra acknowledged that cost pressures are becoming increasingly evident across various industries.
Higher input costs, energy expenses, and global supply chain disruptions are contributing to pressure on businesses and profit margins.
The RBI said it will continue to closely monitor evolving economic conditions and take appropriate measures as needed.
Key Highlights
- RBI keeps repo rate unchanged at 5.25%.
- MPC unanimously votes to maintain policy rates.
- FY27 GDP growth forecast lowered from 6.9% to 6.6%.
- SDF rate retained at 5.0%.
- MSF rate and bank rate remain at 5.5%.
- Core inflation stable at 3.7%.
- Services exports expected to remain resilient.
- Monsoon and El Niño risks could affect inflation outlook.
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