ICRA Signals Extended Pause in Policy Rates Amid Strong Growth Outlook

India’s monetary policy trajectory is expected to remain steady, as ICRA anticipates an extended pause in policy rates unless economic growth slows significantly. The Reserve Bank of India (RBI) recently reduced the repo rate by 25 basis points to 5.25%, marking what ICRA believes to be the final cut in the current easing cycle.

ICRA highlighted that while inflation has moderated—partly due to tax policy changes—the central bank’s upward revision of GDP growth to 7.3% for FY2026 suggests resilience in the economy. The agency emphasized that any further rate easing would only be warranted if growth outcomes fall short of expectations.

Key Highlights

- RBI cut repo rate by 25 bps to 5.25% in December 2025.
- ICRA expects this to be the final cut in the current easing cycle.
- CPI inflation forecast revised downward to 2.0% for FY2026.
- GDP growth projection raised to 7.3%, reflecting strong momentum.
- Extended pause likely unless growth materially undershoots projections.
- Liquidity interventions may continue depending on systemic conditions.

This outlook underscores a cautious but stable monetary stance, balancing growth optimism with inflation control.

Sources: The Hindu Business Line, BusinessWorld, Economic Times, ICRA Report