Reserve Bank of India keeps repo rate unchanged, hints at future hikes as inflation outlook rises

The Reserve Bank of India (RBI) left its policy repo rate unchanged at 5.25% and maintained a neutral stance, while raising its retail inflation forecast for FY 2026‑27 to 5.1% from 4.6%. The central bank also cut its GDP growth projection to 6.6% from 6.9%, citing heightened risks from the ongoing West Asia conflict, elevated global energy prices, supply‑chain disruptions and uncertain monsoon rainfall.

Analysts expect the RBI may implement one to two 25‑basis‑point rate hikes in the second half of the fiscal year, with possible timing between August and December 2026, especially if the conflict persists or oil prices remain high. Some economists, however, argue that the RBI could keep rates steady if inflation pressures ease. The RBI also announced measures to attract foreign capital, including tax exemptions on interest and capital‑gain income for eligible foreign investors, concessional terms for foreign‑currency deposits by NRIs, and subsidies on hedging costs for offshore borrowings. Industry groups such as Assocham said the decision should bolster business sentiment and support economic growth.