Mumbai: India’s macroeconomic fundamentals over the medium-term remain healthy and robust amid volatile financial markets, said RBI Governor Sanjay Malhotra as all MPC members voted for status quo on policy rates at their meeting earlier this month.
According to the minutes of the Monetary Policy Committee (MPC) released by the Reserve Bank of India (RBI) on Friday, as most of the members, including the Governor, agreed that the current rate is “appropriate”, considering the current growth-inflation dynamics.
The MPC meeting, which was held from February 4 to 6, decided to leave the short-term lending rate (repo) unchanged at 5.25 per cent.
Despite escalating geopolitical tensions and increasing trade frictions posing huge challenges, global growth, supported by a surge in technology-related investments, conducive fiscal and monetary policies, and accommodative financial conditions, is expected to be marginally higher in 2026, minutes quoted Malhotra as saying.
Inflation outcomes may remain divergent across countries. Accordingly, central banks are likely to tread dissimilar policy paths while approaching the end of their easing cycles, he added.
“In the backdrop of large fiscal stimulus and geopolitical uncertainty, global investor sentiments are nervous and financial markets remain volatile,” the governor added.
Overall, India’s macroeconomic fundamentals over the medium-term, including the external sector, remain healthy and robust, he said, adding that in terms of the inflation-growth dynamics, “we are in a similar or slightly better position than at the last policy”.
Growth prospects are looking up while inflation outlook remains broadly unchanged, and several recent developments on the external front have provided room for greater optimism, he said.
“Given the present state of the economy and its outlook – buoyant growth and benign inflation, I feel the current policy rate is appropriate. Accordingly, I vote for continuation of the policy repo rate at 5.25 per cent and retain the neutral stance,” Malhotra added.
MPC Member and Deputy Governor Poonam Gupta opined that, underpinned by the continued buoyancy of high-frequency indicators and model-based projections, preliminary estimates of growth for 2026-27 by various agencies have been revised upwards.
The RBI has also slightly raised the real GDP growth projections for Q1 and Q2 of 2026-27, guided by the positive near-term outlook and the trade deals.
“Having already lowered the policy rate by a cumulative 125 bps in four of the last six meetings, with transmission of the last rate cut announced in December 2025 still unfolding, and as the data from the new series is awaited for both GDP and inflation, another rate cut does not seem warranted at this point in time,” Gupta said.
Based on a comprehensive review of the domestic macroeconomic conditions and the outlook, the MPC was of the view that the current policy rate was appropriate, and had voted to continue with the existing policy rate.
RBI Executive Director and MPC Member Indranil Bhattacharyya, who also voted for retaining the current policy rate at its present level, said that given that inflation, excluding precious metals, is expected to remain benign for the foreseeable future.
He also favoured retaining the neutral stance of the monetary policy as it provides the flexibility to respond appropriately to the evolving situation.
Besides three members from the RBI, the MPC has an equal number of external members. All the external members -- Nagesh Kumar, Saugata Bhattacharya, and Ram Singh -- favoured continuing with the repo rate of 5.25 per cent. According to the minutes, Kumar said the economic outlook for the Indian economy has brightened considerably since the December 2025 MPC meeting.
The conclusion of the long-pending EU-India FTA negotiations on January 27, followed quickly by the announcement of the US-India trade deal, has helped to lift the sentiment, which had been depressed by the imposition of 50 per cent tariffs on India’s exports by the US since August 2025.
The momentum has been further boosted by the Union Budget 2026-27 proposals, including fostering the manufacturing sector, tourism, services, and the new Data Centres policy, while sustaining the big thrust to the infrastructure capex.