Mumbai: The Reserve Bank of India (RBI) released its October 2025 Monetary Policy Report today, projecting resilient economic growth for India despite heightened global trade uncertainties and geopolitical tensions. The report forecasts real GDP growth at 6.8% for the financial year 2025-26, down from the 7.8% expansion recorded in the first quarter, while headline inflation is expected to average a benign 2.6%.
According to the Report, GDP growth rate will be easing to a projected 7.0% in Q2, 6.4% in Q3 and 6.2% in Q4. RBI’s expectation for the full year is broadly in line with professional forecasters’ projection of 6.7%.
On inflation, the RBI projects headline Consumer Price Index (CPI) inflation to average 2.6 percent in 2025-26, with 1.8 percent in both Q2 and Q3, rising to 4.0 percent in Q4 due to unfavorable base effects. For 2026-27, inflation is forecasted at 4.5 percent. The report states that “inflation is expected to gradually pick up from Q4:2025-26 on unfavorable base effect, despite the moderating impact of GST rationalisation.”
Headline CPI inflation has moderated significantly, easing to 1.6 percent in July 2025—the lowest in eight years—before rising to 2.1 percent in August, driven by benign food prices. Core inflation has remained steady around 4 percent.
Repo rate unchanged
RBI has kept the repo rate unchanged at 5.50% with a neutral stance. The Monetary Policy Committee, which initiated an easing cycle in February 2025, reduced the repo rate by 25 basis points in April to 6.0 percent and by a front-loaded 50 basis points in June to 5.5 percent, while shifting the policy stance to accommodative in April before reverting to neutral in June.
At its August 2025 meeting, the MPC kept the repo rate unchanged at 5.5 percent and retained the neutral stance, reaffirming its commitment to aligning inflation with the 4 percent target while supporting growth. Additionally, the MPC announced a phased 100 basis points reduction in the cash reserve ratio (CRR) in four tranches starting September 2025 to ease liquidity conditions.
The RBI assesses a balanced risk profile: Upside growth risks include a revival in private investment and resolution of global trade issues, while downside risks stem from protectionist tariffs, geopolitical escalations, and supply chain disruptions. For inflation, upside pressures could arise from adverse weather or elevated crude prices, potentially offset by global demand moderation and softening commodities.
The report concludes optimistically: “India’s robust macroeconomic fundamentals, along with a strong external position, provide resilience against such shocks,” while monetary policy remains focused on price stability and sustained growth against a backdrop of volatile global financial markets and elevated tariff-related risks.
