The Reserve Bank of India, India’s banking regulator, has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25%. Consequently, the standing deposit facility (SDF) rate remains at 5%, and the marginal standing facility (MSF) rate and the Bank Rate remain at 5.50%. The apex bank’s Monetary Policy Committee (MPC) also decided to continue with a neutral stance.
Inflation outlook and risks
Since the last policy meeting, geopolitical uncertainties have heightened significantly. Headline inflation remains contained and below the target, but upside risks to the inflation outlook have increased, driven by rising energy price pressures and probable weather disturbances affecting food prices.
Core inflation pressures remain muted; however, supply chain dislocations and the risk of second-round effects render the future inflation trajectory uncertain.
Economic activity and growth momentum
High-frequency indicators till February 2026 suggest the continuation of strong momentum in economic activity. Growth impulses continue to be supported by robust private consumption and investment demand.
Impact of West Asia conflict
However, the West Asia conflict will adversely impact growth. Higher input costs associated with increases in energy prices, international freight, and insurance costs, along with supply-chain disruptions, could constrain the availability of key inputs for downstream sectors, thus impairing growth.
The Government has taken several measures targeted at supporting exports and protecting supply chains, which should mitigate the adverse impact of the conflict.
MPC assessment and policy approach
The MPC noted that the intensity and duration of the conflict in West Asia, and the resultant damage to energy and other infrastructure, add risks to the inflation and growth outlooks.
However, the fundamentals of the Indian economy are on a stronger footing, providing greater resilience to withstand shocks now than in the past.
The economy is confronted with a supply shock. It is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook.
Policy stance and forward guidance
Accordingly, the MPC voted to keep the policy rate unchanged, even as it remains vigilant, closely monitoring incoming information and assessing the balance of risks. The MPC also decided to continue with the neutral stance, retaining the flexibility to respond judiciously to incoming information.
Domestic economy performance
On the domestic front, the Indian economy remained resilient in 2025–26. Real gross domestic product (GDP) is estimated to grow by 7.6% (y-o-y) during the year, as per the Second Advance Estimates (SAE) of the new GDP series (base year 2022–23).
Private consumption and fixed investment contributed significantly to overall growth, while net external demand remained soft. On the supply side, estimated real GVA growth of 7.7% was driven by a buoyant services sector and robust manufacturing activity.