New Delhi: The Reserve Bank of India’s (RBI) upcoming monetary policy review next week comes at a time when inflation is at an all-time low and economic growth is on a high trajectory.

How is India’s GDP performing?

According to the latest data, India’s real GDP, adjusted for inflation, is estimated to have grown by 8.2 per cent in the second quarter of FY 2025-26, compared with 5.6 per cent during the same quarter of FY 2024-25.

What does the inflation picture look like?

India’s inflation trajectory in October shows significant softening, highlighting the economy’s robust fundamentals and effective price management. Headline inflation, measured by the Consumer Price Index (CPI), eased to 0.25 percent year-on-year, marking the lowest level recorded in the current CPI series.

Will the RBI cut the repo rate?

Economists suggest that the decision on the repo rate at the upcoming RBI monetary policy committee (MPC) meeting could be finely balanced.

“Given that monetary policy is forward looking and inflation in Q4-FY26 and FY27 is likely to be in the 4 per cent plus region, yielding a real repo rate of 1-1.5 per cent, the policy rate appears to be at a fair level. Under these conditions we do not think that there should be any change in the policy rate,” said Madan Sabnavis, Chief Economist at Bank of Baroda.

However, Sabnavis added that since liquidity, although in surplus, is at the lower end of the 1 per cent of Net Demand and Time Liabilities (NDTL) mark, “there could be a case for announcing some Open Market Operations (OMOs).”

“This will be helpful during December when the advance tax payments flow out of the system. On the forecasts side, we do expect downward revision in inflation forecast by 0.1-0.2 percent and an upward revision in GDP forecast of 0.1-0.2 percent for FY26,” he noted.

What has the RBI Governor said about repo rate cuts?

RBI Governor Sanjay Malhotra indicated earlier this week that there was room for a repo rate cut to spur growth at the next monetary policy review meeting in December due to favourable macroeconomic indicators.

After the last MPC meeting in October, Malhotra said there was scope for a repo rate cut going forward as inflation had declined, leaving space for the RBI to focus on growth.

He emphasised the dual mandate of the central bank: “We don’t remain aggressive on growth, nor do we remain defensive.”

How has the RBI acted in recent months?

The MPC, chaired by the RBI Governor, left the repo rate unchanged in the last two reviews, held in August and October, to keep inflation under control. Prior to that, the RBI reduced the repo rate by 100 basis points, from 6.5 per cent to 5.5 per cent, between February and June.

What do market analysts expect?

Morgan Stanley expects the RBI to reduce the repo rate by 25 basis points to 5.25 per cent. The report added that the broader policy stance is likely to remain prudent, with the central bank poised to adopt a data-dependent approach once this step is taken.

(With agency inputs)