The Reserve Bank of India's Monetary Policy Committee is widely anticipated to maintain the current repo rate at 5.5 percent during its upcoming three-day meeting scheduled from December 3 to 5. This would mark the third consecutive time the central bank has held rates steady, reflecting the economy's robust performance and controlled inflation environment.
Strong Economic Indicators Support Status Quo
Recent economic data provides compelling reasons for the MPC to maintain its current stance. India's gross domestic product expanded at an impressive 8.2 percent in the second quarter of FY2026, accelerating significantly from the 5.6 percent growth recorded in the same quarter last year. This represents the fastest pace of economic expansion in six quarters.
Simultaneously, consumer price index inflation eased to a record low of 0.25 percent in October 2025, down from 1.4 percent in September. This substantial moderation has been driven by continued deflation in food prices, the impact of GST rate reductions on goods and services, and favorable base effects.
Expert Views on Policy Direction
Leading economists from major financial institutions unanimously expect the rate-setting panel to maintain both the repo rate and the neutral policy stance. Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India, noted that earlier expectations of a 25 basis point rate cut have diminished following the strong Q2 growth figures and evolving economic conditions.
Anubhuti Sahay, Head of India Economic Research at Standard Chartered Bank, emphasized that with GDP growth running at 7 percent and the easing cycle nearing its end, the urgency for immediate rate cuts has reduced. She suggested that maintaining current rates while signaling future cuts might produce better transmission effects in financial markets.
Revised Economic Projections Expected
Economists anticipate the RBI will revise its fiscal year 2026 projections during the policy announcement. Madan Sabnavis, Chief Economist at Bank of Baroda, expects a downward revision in inflation forecasts by 0.1-0.2 percent and an upward adjustment in GDP growth projections by a similar margin.
Standard Chartered Bank's analysis suggests the central bank might raise its GDP growth forecast to approximately 7.5 percent and adjust inflation expectations to around 2 percent for FY26. This would represent a significant improvement from the October policy, where the RBI had already upgraded GDP growth projection to 6.8 percent from 6.5 percent and reduced inflation forecast to 2.6 percent from 3.1 percent.
Liquidity Measures and Lending Rate Impact
Analysts are watching for potential liquidity management measures, particularly open market operations, to address banking system liquidity. Despite current surplus conditions, liquidity has decreased from an average of ₹2.2 lakh crore in the first half of November to approximately ₹1.5 lakh crore subsequently.
Regarding lending rates, the continuation of the repo rate at 5.5 percent means interest rates on loans and deposits are likely to remain stable. All external benchmark lending rates linked to the repo rate will not increase, though lenders might adjust rates on loans connected to the marginal cost of fund-based lending rate.
The MPC's decision, scheduled for announcement on December 5, comes amid broadening economic recovery supported by both urban and rural consumption, reducing the immediate need for monetary stimulus despite the comfortable inflation outlook.
