RBI Holds Interest Rates Steady, Cuts Growth Forecast Amid West Asia Uncertainty

The Reserve Bank of India (RBI) has kept its benchmark repo rate unchanged at 5.25% for the second consecutive monetary policy review, opting for caution as geopolitical tensions in West Asia, rising crude oil prices and currency pressures cloud the economic outlook. The decision was taken unanimously by the Monetary Policy Committee (MPC), which also retained its neutral policy stance.
While leaving borrowing costs unchanged, the central bank revised its economic projections to reflect emerging global risks. RBI Governor Sanjay Malhotra announced a reduction in the GDP growth forecast for the current financial year to 6.6%, down from the earlier estimate of 6.9%. At the same time, the inflation outlook was raised to 5.1%, citing concerns over elevated energy prices, supply-chain disruptions and uncertainty surrounding the monsoon.
The policy decision comes against the backdrop of escalating conflict in West Asia, which has pushed up oil prices and increased volatility in global financial markets. A weakening rupee and capital outflows have added to the challenges facing policymakers. Despite these pressures, the RBI chose not to raise rates, preferring instead to monitor evolving conditions while supporting economic growth.
To strengthen the rupee and attract foreign capital, the RBI also announced a series of measures aimed at boosting dollar inflows. These include steps to make investments in government bonds more attractive and incentives for non-resident Indians to increase foreign currency deposits.
While India’s economy remains relatively resilient compared to many global peers, the RBI acknowledged that external risks have increased significantly. Future policy decisions, officials said, will remain dependent on incoming data and developments in the global environment.