The Reserve Bank of India unveiled a liquidity-boosting package that comprises a three-year USD/INR buy-sell swap and Rs 1 lakh crore in government bond OMO purchases, along with a unanimous 25 basis point repo rate drop to 5.25 percent. Governor Sanjay Malhotra stated that the central bank is still dedicated to supplying enough long-term liquidity, pointing out that its foreign exchange reserves are strong at $686 billion.
Citing robust rural demand, increasing urban consumption, and bolstering private sector activity, the RBI increased its prediction for GDP growth in FY26 to 7.3%. According to Malhotra, the year’s growth-inflation dynamics were a unique “goldilocks period,” with credit expansion solidifying across all industries.
The committee noted that both headline and core inflation are predicted to be close to or below 4% through 1HFY27 and decreased the policy rate after evaluating strong domestic activity and accelerating disinflation. This month, the central bank will buy Rs 1 lakh crore worth of government assets and carry out a buy-sell exchange worth USD 5 billion to provide long-term liquidity.
In FY26, real GDP is now expected to rise by 7.3%, with Q3 growth of 7.0% and Q4 growth of 6.5%. The RBI projects growth in Q1 and Q2 of FY27 at 6.7% and 6.8%, respectively, driven by sustained rural demand, strong investment activity, and steadily rising urban consumption.
The FY26 CPI inflation rate has been lowered from 2.6 percent to 2.0 percent, with Q3 and Q4 rates of 0.6 and 2.9 percent, respectively. The governor observed that food deflation has deepened and pressures induced by precious metals have eased, indicating that inflation has grown more widespread on the downside. When gold is taken into account, underlying inflation pressures become “even lower.”
