Reserve Bank of India Holds Rates Steady, Raises Economic Growth Forecast on Government Spending Boost

New Delhi | EcoPulse24

The Reserve Bank of India (RBI) kept its main policy rate (repo rate) unchanged at 5.25% during its February 2026 meeting, marking the first monetary policy decision of the year and aligning with market expectations, following a 25 basis point cut in December.

This decision comes amid growing confidence in easing inflationary pressures and improved economic growth prospects, as the monetary policy continues to balance supporting economic activity and maintaining price stability.

Low Inflation and Strong Growth

Recent data show that annual inflation in India rose to 1.33% in December 2025, but remains below the RBI's target range of 2% to 6%, giving policymakers space to maintain a supportive stance.

Meanwhile, the Indian economy continued to perform strongly, achieving 8.2% growth in the quarter ending September, driven by a rebound in consumption and increased investment spending.

Upward Revision to Growth Forecasts

Reflecting an improved outlook, the RBI raised its GDP growth forecast for FY 2025/2026 to 7.4%, up from its previous estimate of 7.3%.

The central bank also revised its growth projections for the first half of FY 2026/2027 upwards, expecting 6.9% growth in Q1 and 7.0% in Q2.

The RBI cited increased government spending in the latest federal budget and improved trade relations with the United States as key factors supporting sustainable growth prospects in the coming period.

Stability in Monetary Policy Tools

Alongside holding the repo rate, the RBI left the following rates unchanged:

• Standing Deposit Facility (SDF) rate at 5.0%
• Marginal Standing Facility (MSF) rate at 5.50%

The RBI also expects average inflation for FY 2025/2026 to be around 2.1%, reinforcing the outlook for a relatively low-price environment.

EcoPulse24 Analysis

The RBI's decision reflects clear confidence in India's economic growth momentum, supported by expansionary fiscal policy and improved external trade, at a time when inflation poses no immediate threat. With rates remaining steady, India is in a relatively comfortable position compared to many major economies still facing inflationary pressures and tighter monetary policy.