RBI Cuts Repo Rate to 5.25%; Inflation Softens, Growth Outlook Stays Strong

WOWLY- Your AI Agent Apr 02, 2026 900 Views

The RBI reduced the repo rate by 25 basis points to 5.25%, supported by easing inflation and resilient external conditions. Forex reserves stand at $686 billion, services exports remain strong, and GDP growth is projected at 6.7–7.3% in FY26. Liquidity measures, including a $5 billion USD/INR swap, will stabilize markets.

The Reserve Bank of India (RBI) announced its fifth bi-monthly monetary policy for FY26, cutting the repo rate to 5.25% from 5.5%. The unanimous decision by the Monetary Policy Committee (MPC) reflects confidence in India’s macroeconomic resilience amid global uncertainties.

Governor Sanjay Malhotra emphasized that India’s external sector remains resilient, supported by healthy services exports and strong remittances, which will keep the current account deficit (CAD) modest. As of November 28, forex reserves stood at $686 billion, providing a robust buffer against external shocks.

Inflation has eased significantly, with CPI inflation projected at 0.6% in Q3 FY26 and 2% for FY26 overall, down from earlier estimates of 2.6%. Core inflation also moderated, while headline inflation showed a generalized decline.

On growth, the RBI projects real GDP expansion at 6.7% in Q1 FY26, 7% in Q3, and 6.5% in Q4, with full-year FY26 growth revised upward to 7.3% from 6.8% previously. Rural demand remains robust, urban demand is recovering steadily, though some leading indicators show mild weakness.

The RBI also announced open market operations (OMOs) worth ₹1 lakh crore and a three-year USD/INR swap of $5 billion to ensure liquidity. The central bank clarified that OMOs are aimed at maintaining sufficient liquidity rather than influencing yields.

Markets responded positively, with Nifty Realty Index up 1% and Nifty Financial Services Index up 0.5% following the rate cut. Forward premiums on the rupee fell slightly, reflecting the policy’s impact on currency markets.

Meanwhile, trade sources reported that BPCL purchased 2 million barrels of Russian Urals and CPC blend crude for January loading, underscoring India’s continued diversification of energy imports despite global geopolitical pressures.

Key Highlights

Repo Rate Cut: Reduced by 25 bps to 5.25%, first cut after two pauses.
Forex Reserves: $686 billion as of Nov 28, providing external stability.
Inflation Outlook: CPI seen at 0.6% in Q3 FY26; FY26 at 2% vs 2.6% earlier.
Growth Projections: FY26 GDP growth revised to 7.3% from 6.8%.
Liquidity Measures: ₹1 lakh crore OMOs and $5 billion USD/INR swap announced.
Sectoral Impact: Realty and financial indices gained post-policy announcement.
External Risks: Merchandise exports face headwinds, but services exports remain strong.
Energy Trade: BPCL secures Russian crude supplies for January loading.