4 min readMumbaiUpdated: Feb 21, 2026 03:59 AM IST
India’s macroeconomic fundamentals, including the external sector, remain healthy and robust in the medium-term, Reserve Bank of India (RBI) Governor Sanjay Malhotra wrote in the minutes of the February Monetary Policy Committee (MPC) meeting, released on Friday.
ARTICLE CONTINUES BELOW VIDEO
The recent trade agreements, particularly with the EU and the US, will not only strengthen exports and the current account but also bring in higher investments, he said.
In the meeting, the six-member rate setting panel unanimously decided to keep the repo rate unchanged at 5.25%. The MPC, in a 5:1 majority, voted to keep the policy stance ‘neutral’. The RBI raised the FY26 GDP forecast to 7.4% from 7.3% earlier, and Q1 and Q2 FY27 growth projections by 20 basis points (bps) each to 6.9% and 7%, respectively.
The forecast for the consumer price index (CPI) inflation was revised to 2.1% from 2%.
“Growth prospects are looking up while inflation outlook remains broadly unchanged. Moreover, several recent developments on the external front have provided room for greater optimism,” Malhotra wrote in the minutes of the meeting.
“Given the present state of the economy and its outlook — buoyant growth and benign inflation — I feel the current policy rate is appropriate,” he said.
RBI Deputy Governor Poonam Gupta said at present, risk to inflation from external sources such as oil prices, commodity prices, or pass through of the exchange rate depreciation, is perceived to be limited. With capacity utilization rates steady at 74%, she said buoyant economic activity is unlikely to result in higher inflation.
Story continues below this ad
“Having already lowered the policy rate by a cumulative 125 bps in four of the last six meetings; with transmission of the last rate cut announced in December 2025 still unfolding; and as the data from the new series is awaited for both GDP and inflation, another rate cut does not seem warranted at this point in time,” wrote Gupta.
The retail inflation, as per the new CPI series stood at 2.75% in January.
MPC’s external member Ram Singh, who voted to shift policy stance to accommodative, said the exact quantum and timing of the further rate cut will depend on the incoming data, but a growth-supporting stance is very much consistent with a stable inflation outlook.
“Moreover, given the stable inflation and fiscal outlooks, a change in stance to ‘accommodative’ will facilitate transmission of the rate cuts so far by putting downward pressure on market rates, yields for sovereign and corporate bonds and the rate spread between the two,” Singh wrote.
Story continues below this ad
MPC member and RBI’s Executive Director Indranil Bhattacharyya, said with headline inflation remaining well below the target throughout 2025-26 and projected at around the target in H1 FY27, the current policy rate and the stance offers scope for remaining growth-supportive without stoking inflation.
“The modest upward revision in projected inflation, till it remains within the tolerance band of the flexible inflation targeting (FIT) framework and does not unhinge inflation expectations, does not warrant a change in the policy rate,” he said.
Another external MPC member Saugata Bhattacharya said the new GDP, CPI inflation and IIP series will provide a clearer lens on the growth-inflation balance. “Assessing the macro-financial environment, while awaiting the new economic data series, I think the policy rate is appropriate,” he said.
MPC member Nagesh Kumar said the brightening economic growth outlook amid a continued benign inflationary trend provides an opportunity for India to stay in the ‘goldilocks’ zone for longer.