India’s economy is projected to grow at 6.6% in the current fiscal year, even as inflation is expected to rise to 5.1%, the Reserve Bank of India (RBI) said in its latest monetary policy remark on Friday. The central bank has also kept the repo rate unchanged at 5.25%, maintaining a neutral stance, citing global uncertainties in the backdrop of the West Asia crisis.

“The global economic outlook remains clouded by the continuing geopolitical impasse in West Asia, as sharply escalating energy prices and global supply chain disruptions continue to hinder economic activity,” RBI Governor Sanjay Malhotra said while announcing the monetary policy decision.

The six-member Monetary Policy Committee (MPC), chaired by Malhotra, unanimously voted to keep the policy repo rate unchanged at 5.25%, alongside unchanged SDF, MSF, and bank rates at 5%, 5.50%, and 5.50%, respectively.

Cuts FY27 GDP growth forecast to 6.6% vs 6.9% earlier

The central bank lowered its GDP growth forecast to 6.6% for FY27, from an earlier projection of 6.9%, citing external headwinds and supply-side disruptions.

“After a detailed assessment of evolving macroeconomic and financial developments and the outlook, the MPC voted unanimously to keep the policy repo rate unchanged at 5.25%,” the Governor said, adding that global risks and energy price volatility continue to weigh on the outlook.

Quarterly growth projections were placed at 6.3% in Q1, 6.5% in Q2, and 6.8% in Q3, reflecting a gradual pickup but with downside risks from prolonged geopolitical uncertainty, weather disruptions, and supply chain bottlenecks.

Inflation projected at 5.1%

On prices, the RBI raised its consumer price index (CPI) inflation forecast to 5.1% for the current fiscal, noting that energy costs and supply-side pressures are likely to keep inflation elevated in the coming months.

“CPI inflation remains below the target, despite shocks, as pass-through of price pressures has been limited, while the baseline projections point towards headline inflation firming up towards the upper tolerance level in Q3,” the Governor said.

Quarterly inflation is projected at 4.2% in Q1, 5.1% in Q2, 5.9% in Q3, and 5.4% in Q4. Core inflation, however, is expected to remain relatively contained at 4.7%.

The RBI cautioned that risks remain skewed to the upside due to global commodity price shocks, monsoon uncertainty, and potential second-round effects on wages and inflation expectations.

Policy stance remains neutral

Despite the evolving risks, the MPC opted to hold rates steady, emphasising the need for patience and data dependence.

“Although risks of higher inflation have amplified, the MPC felt it would be prudent to wait for greater clarity to emerge,” the Governor said, adding that the committee will closely monitor supply-side pressures and their impact on inflation expectations.

“The MPC also decided to continue with the neutral stance,” he said, underscoring a cautious approach as the central bank balances growth resilience against emerging inflationary pressures.

The central bank had last reduced the repo rate by 25 basis points (from 5.50%) in December 2025. In the previous bi-monthly policy meeting in April 2026, the apex bank had also left rates unchanged and maintained a “neutral” stance.