India has witnessed a series of supportive fiscal steps this year, ranging from alterations in income tax slabs to the rationalisation of the Goods and Services Tax (GST). These measures are expected to stimulate consumption, especially as the festive season approaches. Against this backdrop, the Reserve Bank of India’s Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, is set to announce its repo rate decision today. Investors, businesses, and policymakers alike are closely monitoring whether the central bank will opt for another rate cut or maintain the status quo, as it carefully weighs the balance between inflationary pressures, global uncertainties, and the government’s fiscal reforms.
A Bloomberg survey suggests that opinion remains divided on the upcoming policy action. Out of 38 economists surveyed, 24 anticipate that the RBI will hold the repo rate steady at 5.5%, while 14 believe there is scope for a modest 25 basis point reduction. The decision comes at a time when inflation is at the lower end of the RBI’s 2%–6% comfort band, which provides the central bank some flexibility. However, lingering risks such as high tariffs imposed by the United States, weakness in the rupee, and an uncertain global economic environment are adding complexity to the MPC’s deliberations.
According to Sankar Chakraborti, Managing Director and CEO of Acuite Ratings & Research, the RBI is likely to maintain its current stance, keeping the repo rate unchanged at 5.5%. This would represent the second consecutive pause after a sharp 100 basis point rate cut earlier this year. He highlighted that inflation has been well below target, with the Consumer Price Index (CPI) recorded at 2.7% in August and forecasts for FY26 staying in the range of 2.6%–2.8%. Furthermore, the rationalisation of GST is projected to ease inflation further by 25 to 75 basis points. Despite this, the central bank may prefer to wait and gauge the full impact of these fiscal adjustments before making any additional policy moves.
On the growth side, Chakraborti noted that GDP growth in the first quarter of FY26 came in at a strong 7.8%, supported by government expenditure and rural demand. The RBI is expected to keep its full-year GDP forecast at 6.5%. Still, he warned that challenges remain, particularly with weak private investment and subdued urban consumption, both of which are restraining the economy’s momentum. These structural hurdles suggest that while growth is steady, there is limited room for aggressive monetary easing in the near term.
Some analysts see room for rate cuts later in the year but not immediately. Vineet Agrawal, co-founder of Jiraaf, pointed out that the RBI has already frontloaded its monetary easing through the 100-basis-point reduction earlier this year. In his view, the upcoming September–October policy review is likely to result in a pause, with the possibility of a 25 basis point cut toward the end of FY26, depending on how growth and inflation dynamics evolve. He added that bond markets are not pricing in any immediate cuts, as evidenced by the steady 10-year government security yield, which hovers around 6.5%.
Alongside monetary considerations, fiscal and external factors are playing an increasingly influential role. India’s proactive fiscal stance, marked by income tax reliefs and GST rationalisation, is designed to push up domestic consumption. Liquidity conditions remain comfortable after earlier reductions in the Cash Reserve Ratio (CRR). Moreover, with the trade deficit narrowing and GDP growth showing resilience, immediate threats to the growth outlook appear limited. However, risks from abroad are intensifying. U.S. President Donald Trump’s imposition of steep 50% tariffs on Indian exports, coupled with the ongoing depreciation of the rupee, has increased concerns about India’s trade balance and capital flows.
Vinayak Magotra, Product Head and part of the founding team at Centricity WealthTech, echoed this cautious optimism. He believes that the RBI is likely to pause in the current meeting, noting that GST rationalisation will provide a short-term consumption boost. He also pointed out that inflation is expected to remain contained, with the projection for FY26 CPI revised downward from 3.7% to 3.1%. This gives the central bank additional flexibility for future policy moves.
In essence, while inflation remains comfortably within the target range and fiscal measures are cushioning domestic demand, global trade disruptions and external shocks continue to cloud the outlook. Having already cut rates significantly this year, the RBI may choose to hold steady in today’s policy announcement. At the same time, it could strike a dovish tone, keeping the door open for further rate reductions later in the year if growth falters or external risks intensify.
