Two key economic events are awaiting that is going to shape the Indian economy this fiscal year. Annual Budget for FY27 is scheduled to be held on Februrary 1 and the Reserve Bank of India is scheduled to meet and decide on interest rates between February 4-6. Even as the expectations on what the Budget will offer is still being deliberated, RBI’s rate cut trajectory is expected to continue.
So far the RBI has cut policy rates by 125 bps in 2025 but the impact is passed on in tranches. Crisil believes that “the transmission of a 125-basis point cut in policy rates in 2025 is expected to continue next fiscal, which will provide an upside to growth as the peak impact of monetary policy is typically seen with a lag.”
RBI likely to consider another rate cut in February 2026 meet
In the upcoming February Policy, the RBI is expected cut rates by 25 bps. “We now expect that there is a high probability that the RBI is likely to follow up this rate cut with another in Feb’26, which will be the last in this monetary easing cycle. We can hence see the terminal repo rate at 5.0%,” said Aditi Gupta, analyst at Bank of Baroda after the December cut.
The rate-cut cycle began in last February, when the MPC unanimously lowered the repo rate by 0.25%. This was followed by another 0.25% cut in the April meeting and a sharper 0.5% reduction in June. The committee then chose to pause in both the August and October reviews before cutting the rate once more in the December meeting by 0.25%.
With these cuts and pauses through the year, the repo rate declined from 6.25% in February to 5.25% in December.
Sanjay Malhotra’s first MPC meeting in February, 2025
The six members of the MPC consider inflation, GDP, and global uncertainty, among other factors, while making decisions on the repo rate.
The meeting of the RBI MPC in last February also marked as the first meeting of Sanjay Malhotra as governor. He took charge as the 26th governor of the RBI on December 11, 2024, replacing Shaktikanta Das.
The year started with a repo rate cut by 25 basis points to 6.25% with stance maintained at ‘neutral’. The Governor said that the then environment called for “a less restrictive monetary policy”.
RBI’s April, 2025 meeting- A recap
The second meeting of 2025 was held in April amid Trump slapping 26% tariff on India. In this meeting, MPC reduced the repo rate by another 25 basis points to 6.00% and shifted its stance from neutral to accommodative. The RBI said this adjustment aims to “achieve the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.”
RBI’s June, 2025 meeting- A recap
In June last year, the, RBI delivered a sharper-than-expected 50 basis points cut in the repo rate, bringing the benchmark rate down to 5.50%. To improve liquidity and support credit growth, the RBI also lowered the Cash Reserve Ratio (CRR) by 100 bps to 3% of NDTL. The reduction was set to take place in four tranches of 25 bps each, beginning September 6.
The move was to inject about Rs 2.5 lakh crore of primary liquidity into the banking system by December. RBI had earlier injected Rs 9.5 lakh crore of durable liquidity since January.
RBI’s August, 2025 meeting- A recap
In the fourth meeting of the calendar year, the RBI kept the policy repo rate unchanged at 5.5% after cutting it three consecutive times, totalling a 100 bps reduction.
The RBI said the pause is consistent with its objective of stabilising inflation at 4% within the tolerance band while supporting economic activity. The MPC noted that inflation is significantly below the target for now, largely due to softening food prices, although core inflation remains steady around 4%. At the same time, the impact of the 100 basis points of cumulative rate cuts delivered since February 2025 is still unfolding.
This meeting was held amid the additional 25% tariff heat on India, taking the total to 50%.
RBI’s October, 2025 meeting- A recap
In the October meet, MPC again decided to left the repo rate unchanged at 5.50%, citing a sharp moderation in inflation and the need to assess the impact of past policy actions. The comitte also retained the neutral policy stance. The meet come ahead of GST rationalistion that was set to take effect from September 22 aiming to boost domestic consumption and provide some cushion against external pressure and US tariff.
The MPC noted in the October meet that while domestic growth remains solid, external demand continues to be weak and tariff-related developments may weigh on exports in the second half of the year.
RBI’s December, 2025 meeting- A recap
One of the highlight of the December meet, RBI governor in his speech said that indian economy in H1FY26 presents ‘rare Goldilocks period’ with GDP growth at 8.0% and Inflation at a benign 2.2%.
“The RBI Governor in his statement noted that a “rare goldilocks” opportunity was provided in H1 FY26 with solid growth and benign inflation. This largely motivated the RBI to reduce its policy rate by 25bps,” said Aditi Gupta, analyst at Bank of Baroda.
The December MPC was held amid Rupee hit an lifetime low cross the 90 mark.
Outlook ahead
The RBI MPC in the December meet said domestic factors such as favourable crop prospects, benign inflation, stronger balance sheets and supportive monetary conditions should continue to aid growth. External risks persist, but ongoing trade and investment negotiations may offer upside.