The Reserve Bank of India’s Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, wrapped up its February 2026 policy meeting with a decision to hold benchmark interest rates steady.
The outcome had largely been priced in by markets, particularly after the central bank delivered cumulative rate reductions of 125 basis points during the current financial year 2025-26 (FY26).
The central bank, however, upgraded its growth forecast from the earlier December meeting. The GDP estimate for the 2025-26 fiscal year was upgraded to 7.4 per cent, from the earlier forecast of 7.3 per cent shared in the December MPC.
Growth has been driven largely by strong private consumption and robust fixed investment. Net external demand, however, has weighed on output, with imports growing faster than exports. On the supply side, real gross value added (GVA) growth of 7.3 per cent reflects strength in the services sector, resilience in agriculture and a revival in manufacturing activity, Governor Sanjay Malhotra revealed.
The growth projection for the first quarter of the upcoming 2026-27 fiscal year (FY27) was also revised from 6.7 per cent to 6.9 per cent in today’s MPC. The governor further said that GDP estimate for the second quarter of FY27 is being increased to 7 per cent, from the earlier forecast of 6.8 per cent.
“Risks are evenly balanced”, the governor revealed. He added, “Recently concluded India-EU FTA, prospective India-US trade deal will support export momentum.”
VIDEO | RBI Governor Sanjay Malhotra says, “With signing of India-EU trade deal and the US trade agreement in sight, growth momentum will likely to be sustained for a longer period.”#MPC #MonetaryPolicy #RBI
(Source: Third Party)
(Full video available on PTI Videos -… pic.twitter.com/AFvF5lgi3R
— Press Trust of India (@PTI_News) February 6, 2026
A new GDP series will be unveiled later in the month, based on which, growth estimates for the complete FY27 will be shared in the April meeting, he noted.
Global Backdrop
The global economy demonstrated notable resilience through 2025, supported by front-loaded trade activity, a softer-than-expected impact of tariffs, fiscal expansion across major economies and accommodative monetary settings. While inflation has been gradually moderating, it remains above target in several advanced economies, Malhotra explained.
US bond yields have maintained an upward bias amid fading expectations of early rate cuts, backed by firm economic data. Equity markets, buoyed by sustained investment in technology stocks, have continued to advance. However, fiscal pressures, geopolitical tensions and diverging monetary policy paths across economies have kept financial markets volatile, he added.
Outlook for FY27: Supportive Drivers and Key Risks
Looking ahead, several factors are expected to sustain growth momentum. Continued strength in services, GST rationalisation, favourable rabi prospects, monetary easing and a benign inflation environment are likely to underpin private consumption.
Investment activity is expected to remain firm, supported by high capacity utilisation, supportive financial conditions, strong balance sheets of banks and corporates, steady credit growth and the Government’s ongoing focus on capital expenditure. Robust domestic demand could also encourage fresh private sector investment, he noted.
On the external front, services exports are projected to stay resilient. Merchandise exports may receive a boost from a prospective trade deal with the US, while the comprehensive trade agreement with the European Union, along with trade pacts with New Zealand and Oman, is expected to diversify export markets and strengthen the external sector.
Nevertheless, geopolitical tensions, uncertainty around global trade, volatility in financial markets and fluctuations in international commodity prices remain downside risks.
Inflation Outlook Tightens as RBI Revises Projections Upwards
Inflation has moved back to the centre of the policy debate, with the Reserve Bank of India (RBI) revising its projections slightly higher across key quarters. Although the Monetary Policy Committee (MPC) kept interest rates unchanged, the updated numbers indicate that price pressures may firm up faster than previously expected.
For the current financial year (FY26), headline inflation is now projected at 2.1 per cent, up from 2 per cent estimated in December. The revision is modest, but it signals that the phase of rapid disinflation may be easing.
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