Monetary Policy Statement, 2026-27
62th Meeting of the Monetary Policy Committee · 3–5 August 2026
Chaired by Shri Sanjay Malhotra, Governor, Reserve Bank of India
Rate Unchanged — Repo Rate at 5.25%
Stance: neutral · unanimous vote
Key Highlights
- ▸Repo rate held at 5.25% — unanimous MPC vote
- ▸Neutral stance retained; MPC awaiting clarity on monsoon, geopolitics, and inflation path
- ▸CPI rose to 4.4% in June — first breach of 4% target in 16 months — driven by food and fuel
- ▸Core inflation (excl. food & fuel) unchanged at 3.9%; excl. precious metals at 2.3–2.5%
- ▸Real GDP growth for 2026-27 projected at 6.7%; India remains world's fastest-growing major economy
- ▸El Niño + West Asia conflict flagged as key downside risks to both growth and inflation
Real GDP Growth — 2026-27
Annual projection: 6.7% · Risks evenly balanced
| Quarter | Projection |
|---|---|
| Q1:2026-27 | 7% |
| Q2:2026-27 | 6.4% |
| Q3:2026-27 | 6.5% |
| Q4:2026-27 | 6.8% |
| Q1:2027-28 | 7.3% |
CPI Inflation — 2026-27
Annual projection: 5% · Core: 4.3% · Risks evenly balanced
| Quarter | Projection |
|---|---|
| Q2:2026-27 | 4.7% |
| Q3:2026-27 | 5.9% |
| Q4:2026-27 | 5.5% |
| Q1:2027-28 | 5.3% |
Global Outlook
The global economic outlook in 2026 has been characterised by sharp and frequent market swings, persisting inflation concerns and shifting policy expectations. Relief from the temporary ceasefire in West Asia quickly dissipated amidst resumption of conflict in July. Persistent inflation has prompted several central banks to raise rates while others remain vigilant. The US dollar appreciated, supported by elevated yields, a hawkish Federal Reserve tone, and a relatively buoyant US economy riding on AI-driven productivity gains. Global equity markets remained volatile as investors repriced their exposure to AI-related stocks. Conflict in West Asia, volatile oil prices, sticky inflation expectations, and fragile public finances in systemic economies pose significant downside risks to the outlook.
Domestic Outlook
The Indian economy has remained resilient amidst persisting global headwinds. High frequency indicators available so far point towards steady domestic demand in Q1:2026-27. Private consumption remained robust. Investment continues to be resilient, as suggested by various indicators related to construction, capital goods and bank credit. External demand also sustained, as healthy expansion in services exports was complemented by a rebound in merchandise exports. Looking ahead, the turbulent global economic environment is likely to have some bearing on domestic economic activity. Energy prices and supply chain pressures remain elevated and uncertain. Even though the situation is still evolving, deficient and uneven south-west monsoon amidst El Niño conditions poses some risks to agriculture and rural demand. Nevertheless, government's initiatives pertaining to crop diversification and water harvesting are expected to mitigate the impact. Sustained momentum in services, continuing impact of GST rationalisation, and broadly stable employment conditions should continue to support urban demand.
Inflation Outlook
CPI inflation increased to 4.4% in June 2026 after remaining below the target for 16 consecutive months, though it came in 30 bps lower than earlier projected for Q1:2026-27. The increase was primarily due to higher food and fuel inflation. Fuel inflation rose driven by revision in retail prices following the sharp spike in international energy prices. Despite pressure from higher input costs, core inflation (CPI excluding food and fuel) remained unchanged at 3.9% during May-June. Excluding precious metals, core inflation remained even lower at 2.3–2.5%. El Niño's impact on rainfall distribution continues to remain a risk, though proactive supply management and adequate foodgrain stocks could provide buffers. Headline inflation is expected to rise further in the near term and peak in Q3:2026-27 before moderating.
Rationale for Policy Decision
Headline CPI inflation edged up above the target, as expected. The realised inflation for Q1, however, remained marginally lower than projections reflecting limited pass-through of cost pressures. The higher inflation is mostly on account of fuel and food with little signs of generalisation of price pressures. Core inflation excluding precious metals continues to be benign. Growth continues to be supported by resilient domestic demand, sustained expansion in manufacturing and services, and robust exports, reaffirming India's position as the world's fastest-growing major economy. Even though headline inflation is projected to increase, it is primarily on account of supply-side pressures caused by food and fuel; it is not getting broad-based; core inflation remains moderate. The outlook is hazy because of uncertainties regarding south-west monsoon, El Niño, geopolitics and global trade policy. There is a need for greater clarity to emerge regarding inflation, its path and composition, before taking any policy action.
MPC Composition
Minutes to be published on
19 August 2026
Next MPC meeting
5–7 October 2026
Signed by
Brij Raj, Chief General Manager
Press release
2026-2027/809
Source: Reserve Bank of India · Press Release 2026-2027/809. For regulatory purposes, refer to rbi.org.in.