PR No – 189
7th Oct 2026
New Delhi
25 BPS policy rate hike after 44 months – An expected move given global uncertainties : PHDCCI
The RBI Monetary Policy Committee (MPC) decided to increase policy repo rate 25 BPS, taking repo rate to 5.5%. This decision comes on the back of the sudden re-escalation of global uncertainties, volatility in global crude prices and financial markets, despite resilient but declining global growth, said Mr Rajeev Juneja, President, PHDCCI.
Consequently, the Standing Deposit Facility (SDF) stands at 5.25% and the Marginal Standing Facility (MSF) and Bank Rate stands at 5.75% with a change in the stance from neutral to calibrated tightening.
The policy rate hike after 44 months is in line with industry expectations, given the global scenario and the decision of rate hikes in major central banks across the World. The Governor’s strong stance of no rate cuts in the near future but chances of pause or rate hikes adds to the cautious approach being taken by the RBI, he added.
Growth of the country remains resilient, driven mainly by private consumption, strong investment activity, resilient exports, sound system level parameters of Scheduled Commercial Banks and Non-Banking Financial Companies, backed by the momentum in high frequency indicators including IIP and Manufacturing and Services PMI, he said.
The RBI’s assessment indicates that the domestic economy continues to demonstrate strong underlying momentum. Real GDP growth stood at 7.8% in Q1:2026-27, supported by private consumption, fixed investment, merchandise and services exports, while manufacturing and services activity remained robust. For 2026-27, the RBI has projected real GDP growth at 7.1%, with quarterly growth projected at 7.2% in Q2, 6.9% in Q3 and 6.8% in Q4.
Simultaneously, the manufacturing activity within the country is holding well, service sector activity is broad based, despite marginally lower kharif sowing compared to last year, elevated bond yields, though some weakness in non durable goods and domestic air passenger traffic is observed.
The near-term outlook on inflation points towards continued pressures from the supply side, on account of the deficient Southwest monsoon, El Nino conditions and high volatility in international oil prices. Given this scenario, CPI inflation for 2026-27 is projected at 5.2% with Q2 at 4.9%; Q3 at 6%; and Q4 at 5.7%. Inflation for Q1:2027-28 is projected at 5.6% with risks being evenly balanced. Further, core inflation is projected at 4.4% for 2026-27.
Additionally, moderation in global trade growth, elevated energy prices and persistent trade policy uncertainties pose upside risks to India’s current account deficit in 2026-27. Net Foreign Direct Investment registered sustained improvement driven by higher inflows while Foreign Portfolio Investment recorded net outflows, consequently Balance of Payment is expected to record a healthy surplus in 2026-27, said Mr Juneja .
“The shift to calibrated tightening with global energy prices, geopolitical developments and domestic food-price pressures are creating uncertainty around the inflation trajectory. The priority now should be to ensure that monetary tightening remains data-dependent while maintaining adequate credit flows to productive sectors. Faster improvement in supply-side capacity, logistics, food management and energy security will be critical to complement monetary policy in containing inflation” , said Dr. Ranjeet Mehta, CEO&SG, PHDCCI.