Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday announced that the Monetary Policy Committee () had hiked the repo rate by 25 basis points to 5.5%, marking the first increase in over three years, to control rising inflation amid the continuing crisis in West Asia.
The RBI’s last was in February 2023, when the central bank raised it by 0.25 percentage points to 6.50%. Between 2023 and 2024, it kept the repo rate unchanged before the rate-cut cycle began in 2025. At the bi-monthly monetary policy meeting, the RBI Governor said the MPC had unanimously decided to raise the policy repo rate by 25 basis points and changed its stance to ‘calibrated tightening’ from ‘neutral’, indicating that a rate cut in the near term was unlikely under current conditions.
What RBI Governor Sanjay Malhotra said
1. The central bank governor highlighted the sudden re-escalation in the and said the “consequent hardening, as well as volatility in global crude prices, soured global economic sentiments and heightened financial market volatility.” He added that while global growth remains resilient, it is expected to decelerate this year compared with the previous year.
Malhotra said, “Driven by escalating energy costs and rising food prices, global inflation is projected to increase sharply, prompting monetary policy tightening by major central banks across the world. Lingering trade uncertainty, rising bond yields in advanced economies, and an appreciating dollar are keeping global financial market sentiments nervous and fragile. Further tightening of global financial conditions, uncertainty about the fair valuation of AI stocks, and an elusive resolution of the West Asia conflict pose significant downside risks.”
2. Sanjay Malhotra, during the bi-monthly meeting, said that a , along with , is likely to impact the upcoming rabi season in the country.
3. The Governor announced that the MPC had revised its growth projection for 2027 upwards by 40 basis points to 7.1%, while warning that persistent geopolitical tensions could threaten the economic outlook. He said India’s economy remained resilient despite global challenges, with real GDP expanding by 7.8% in the first quarter of 2026-27.
4. Commenting on stronger foreign direct investment () inflows, healthy forex reserves and a focus on stability, Malhotra said net FDI registered sustained improvement at $13.8 billion in the first four months of this fiscal year compared to $9.6 billion a year ago. He added that forex reserves remain healthy and “adequate to provide import cover for 11 months.”
5. The RBI has projected average headline of 5.2% for 2026-27, with the rate expected to reach 6.0% in the third quarter before easing to 5.7% in the fourth. Citing a rise in core inflation and a larger share of the consumer price index basket recording elevated price increases, Malhotra said, “There are also early signs of inflation becoming generalized.”
(with agency inputs)