The Reserve Bank of India on Friday left the benchmark repo rate unchanged at 5.25 percent, opting for caution amid rising geopolitical tensions, volatile global markets and lingering concerns over inflation. The Monetary Policy Committee (MPC) also retained its 'neutral' policy stance, signalling that future decisions will remain data-dependent.
Announcing the outcome of the three-day policy meeting held from June 3 to 5, RBI governor Sanjay Malhotra said the Indian economy remains relatively well-positioned to withstand external shocks despite an increasingly uncertain global environment. The central bank kept the Standing Deposit Facility (SDF) rate at 5 percent, while the Marginal Standing Facility (MSF) rate and the bank rate remain at 5.5 percent.
Malhotra said the global economy continues to face significant headwinds from the conflict in West Asia, disruptions to trade routes and supply chains, heightened market volatility and cautious business sentiment. However, he expressed confidence that India possesses stronger macroeconomic fundamentals than during previous periods of global stress and is capable of absorbing external pressures with limited impact.
The RBI retained its projection for India's real GDP growth in FY27 at 6.6 percent. According to the bank, elevated energy prices and disruptions in global supply chains are weighing on economic activity worldwide. High-frequency indicators also point to some moderation in certain sectors of the economy.
The MPC noted that risks to both growth and inflation remain significant. The food inflation outlook, in particular, remains uncertain due to forecasts of a subnormal southwest monsoon and the possibility of El Niño conditions affecting agricultural output.
Quarter-wise GDP growth projections for FY27 are:
Q1: 6.6 percent
Q2: 6.3 percent
Q3: 6.5 percent
Q4: 6.8 percent
The RBI projected consumer price inflation (CPI) at 5.1 percent for FY27.
Quarter-wise inflation estimates are:
Q1: 4.2 percent
Q2: 5.1 percent
Q3: 5.9 percent
Q4: 5.4 percent
Malhotra warned that inflation risks remain elevated globally. He noted that major advanced economy central banks could shift towards tighter monetary policies if price pressures persist.
While global equity markets continue to be supported by optimism surrounding artificial intelligence-driven growth, bond markets remain cautious amid renewed inflation fears and concerns over government debt sustainability, he said.
The RBI governor also highlighted growing volatility in foreign exchange markets as investors increasingly seek safe-haven assets. Several emerging market currencies have come under pressure in recent months, reflecting heightened risk aversion in global financial markets.
