Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday projected India’s real GDP growth at 6.5% for the financial year 2025-26, retaining the central bank’s earlier estimate. The announcement came as he addressed the media following the RBI’s bimonthly monetary policy review, which concluded after three days of deliberations by the Monetary Policy Committee (MPC).
“Real GDP growth rate for this year, 2025-2026, is projected at 6.5 per cent, continuing with our earlier forecast, with Q1 at 6.5 per cent, Q2 at 6.7 per cent, Q3 at 6.6 per cent, and Q4 at 6.4 per cent. The risks are evenly balanced,” Malhotra said.
In a significant move, the RBI also lowered the inflation forecast for FY26 from 4% to 3.7%, citing optimism about a good monsoon that could ease price pressures.
Further, in an unexpected move to stimulate a slowing economy, the RBI cut the repo rate by 50 basis points, bringing it down to 5.5%—its lowest level in three years. The repo rate was last seen below this mark on August 5, 2022, when it stood at 5.40%.
“After a detailed assessment of the evolving macroeconomic and financial development and the economic outlook, the MPC decided to reduce the repo rate by 50 basis points,” Malhotra said.
This marks the third consecutive rate cut by the RBI since February 2025, bringing the total reduction to 100 basis points so far this year. In its previous review in April, the repo rate had already been lowered by 25 basis points to 6%.
He added that after reducing repo by 100 bps in quick succession, monetary policy has limited space to support growth.
This is the first time since the onset of the COVID-19 pandemic that the central bank has implemented three back-to-back rate cuts, signaling heightened concerns over slowing growth, which has dipped to a four-year low of 6.5% in FY25. The rate reduction is expected to bring relief to borrowers of home, auto, and corporate loans.