Highlights: ‘We are in a very comfortable position, volatility can happen,’ says RBI Guv on weak Rupee

"This is a calibrated ‘maintenance cut’ rather than a signal of distress, with the repo rate reduced to 5.25% alongside an upgrade in GDP forecasts to 7.3%. The RBI is using the room created by a low-inflation environment to realign real rates, while the ‘Neutral’ stance underlines that it is supporting growth without pre‑committing to a prolonged easing cycle," Says Archit Doshi - Senior Vice President of PL Capital.

"The projection of 7.3% GDP growth for FY 26 is positive for the market. Banks will like the policy decision overall but are unlikely to respond very positively to the rate cut since their NIMs will come under pressure and they will face difficulties in mobilising deposits if deposit rates are lowered," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Dharmakirti Joshi, Chief Economist Crisil said that the rate cut was In line with their expectations

"The repo rate cut is expected to support growth next fiscal, as monetary policy typically has a lagged effect. Today’s liquidity-enhancing measures will also help transmit the policy rate cut to broader market interest rates," he said.

Crisil economist said, "We forecast India’s GDP growth at 7% this fiscal, following an expected slowdown to 6.1% in the second half due to higher United States tariffs and normalisation of government capital expenditure. Next fiscal, we expect GDP to grow a healthy 6.7%."

"We project inflation to remain benign at 2.5% this fiscal but rise to 5% next fiscal largely due to a statistical low-base effect," he added.

Anant Goenka, President of FICCI, said, “This calibrated easing will help stimulate credit offtake, reduce borrowing costs for industry and consumers, and reinforce the current growth momentum,” said

“The upward revision, as announced in the policy today, of estimated GDP growth for current fiscal to 7.3% from 6.8%, combined with a stable and benign inflation outlook, reflects the continued resilience of the Indian economy and the positive impact of sustained policy and reform measures — including the rationalisation of GST. The additional liquidity measures announced, such as the forex swap facility, will meaningfully strengthen market confidence and support investment flows," Goenka added.

“We don't target any level. We just let the rupee find its correct position, correct level and band, ensuring only an orderly movement,” RBI Governor Sanjay Malhotra said while addressing the press conference.

“I do not expect CAD to be as high as 2%,” he added.

“On the external front, services exports are likely to remain strong, while merchandise exports face some headwinds. External uncertainties continue to pose downside risks to the outlook, while speedy conclusion of ongoing trade and investment negotiations presents upside potential,” the RBI noted.

"Both headline and core inflation are expected to be around the 4% target during the 1HFY27," noted RBI.

The MPC noted that headline inflation has eased significantly and is likely to be softer than the earlier projections, primarily on account of the exceptionally benign food prices. Reflecting these favourable conditions, the projections for average headline inflation in 2025-26 and Q1FY27 have been further revised downwards.

Core inflation, which had been rising steadily since Q1FY25, eased at the margin in Q2FY26 and is expected to remain anchored in the period ahead.

RBI has raised its real GDP projection for FY26 to 7.3%, up from the earlier projection of 6.8% announced in the September–October meeting. The central bank has also revised its GDP projections for Q1FY27 to 6.7% and for Q2FY27 to 6.8%.

India's current account deficit moderated from 2.2% of GDP Q2FY25 to 1.3%.

RBI will conduct an OMO purchase worth Rs 1 lakh crore in view of liquidity conditions, RBI Governor Sanjay Malhotra said while announcing the December MPC decisions.

Moreover, the central bank will conduct 3 year dollar-rs buy sell swap in December

FY26 GDP growth: 7.3%
Q3FY26: 7%

Q4FY26: 6.5 %

Q1 FY27: 6.7%

Q2FY27: 6.8%

RBI Governor Sanjay Malhotra begins Monetary policy speech. Policy decisions to be announced soon.

BNP Paribas expects the RBI to stay cautious and says the central bank will not cut rates this time.

“Given external account uncertainties (in both current and capital accounts), sensitivity to INR depreciation might become the decisive policy motivator. A stable GDP growth print and outlook further add to our view that the recent fiscal incentives, liquidity support and credit policy will remain the favoured tools of economic accommodation,” BNP Paribas said.

“The sharp drop in the INR vs the USD in the last few days perhaps only persuades further in favour of policy caution,” it noted.

Rupee rises 9 paise to 89.80 against US dollar in early trade on Friday, ahead of RBI's monetary policy decision. The rupee fell to a lifetime low earlier this week, crossing the 90 mark. Analysts say one of the reasons for the decline is reduced intervention by the RBI.

“Markets expect clarity on whether the central bank will step in to stabilize the currency,” said Jateen Trivedi of LKP Securities.

Read more: 4 reasons why the Rupee is falling: Plunges to historic lows, breaches 90 against dollar

Analysts, investors and markets are closely awaiting the announcement, as the meeting comes at a time when the Indian rupee touched a lifetime low this week, crossing the 90 mark. GDP, however, rose by 8.2%, the fastest pace in six quarters. Inflation, on the other hand, slowed to a record low of 0.25% in October.