Helping hand for a ‘Goldilocks period’

RBI lowers inflation projection, higher growth estimate

- KSHIPRA PETKAR

THE RESERVE BANK of India on Friday sharply revised its forecasts by 50 bps for growth and 60 bps for inflation.

It projected a 7.3% growth for FY26 and lowered inflation expectations to 2% for the year — well below the 4% target.

Announcing the outcome of the Monetary Policy Committee (MPC) meeting, RBI Governor Sanjay Malhotra said the benign inflation outlook on both headline and core continues to provide policy space to support growth. Against this backdrop, the MPC unanimously voted to cut the policy repo rate by 25 basis points to 5.25% while retaining the neutral stance.

Since the October review, inflation has eased at a pace not seen in the flexible inflation targeting era. For the first time since the framework was adopted, average inflation for an entire quarter fell below the lower tolerance limit, coming in at 1.7% in Q2. It dropped further to 0.3% in October, driven largely by a correction in food prices that was contrary to the usual September-October trend.