The Reserve Bank of India's (RBI) crucial three-day Monetary Policy Committee (MPC) meeting commenced in Mumbai on Wednesday, December 3, setting the stage for the central bank's latest bi-monthly policy review. The six-member panel will deliberate on the appropriate policy stance in light of the latest economic data, which presents a unique combination of robust growth and sharply cooling prices. The outcome of these deliberations will be announced by RBI Governor Sanjay Malhotra at 10 AM on Friday, December 5.
The Conflicting Economic Backdrop
The policy review unfolds against a complex economic landscape. On one hand, the Indian economy has demonstrated remarkable resilience, with GDP expanding by 8.2% in the second quarter of the 2025-26 financial year. Economists suggest this momentum likely continued into the October-December quarter, fueled by firm rural demand and a recovery in urban consumption patterns.
On the other hand, inflationary pressures have receded dramatically. Consumer price inflation plummeted to a series low of 0.25% in October 2024, primarily driven by a significant correction in food prices. Current forecasts indicate this period of low inflation may persist, potentially settling below the RBI's own earlier projections.
Expert Views: To Cut or Not to Cut?
This unusual mix of high growth and ultra-low inflation has created a dilemma for the rate-setting panel, leading to divided opinions among experts.
Mehul Pandya, MD and Group CEO of CareEdge Ratings, highlighted the policy conundrum. He explained that strong GDP growth typically discourages rate cuts, while a low inflationary environment usually encourages monetary easing. These opposing forces make the MPC's decision particularly challenging this time.
Adopting an optimistic tone, Mayur Modi, Co-founder and Co-CEO of Moneyboxx Finance Limited, argued that the robust growth provides the RBI with sufficient headroom to act. He stated that with inflation comfortably within the central bank's tolerance band, the case for a repo rate cut has strengthened meaningfully. A well-timed reduction, according to him, could further stimulate consumption and credit demand across vital sectors of the economy.
Market Expectations and Forecast
Despite the growing speculation around a potential rate cut, an assessment by Bank of Baroda suggests the central bank will likely maintain the status quo. The report forecasts that the MPC will keep the repo rate unchanged at 5.50% and retain its neutral policy stance.
This expectation is rooted in the economy's continued outperformance, with urban spending and a resilient rural economy expected to sustain growth momentum into the third quarter. The report also noted encouraging signs of recovery in private investment, supported by rising credit demand.
The final decision, which will be closely watched by markets, businesses, and consumers alike, will reveal how the RBI chooses to navigate this rare economic crossroad—prioritizing growth support or remaining vigilant in a low-inflation regime.
