RBI’s rate decision reflects favourable assessment of India’s growth: Economists

Mumbai:The Reserve Bank of India’s (RBI) decision to keep the policy rate unchanged reflected a favourable assessment of growth and inflation dynamics, economists said on Friday.

The RBI MPC, in its first monetary policy review of 2026, kept the repo rate unchanged at 5.25 per cent.

Analysts welcomed the pause on rate hikes and said they expect the RBI to maintain an extended pause, due to positive cyclical upswing and confidence from successful conclusion of multiple trade deals.

Radhika Rao, Executive Director and Senior Economist at DBS Bank, said the decision was anchored in a favourable macroeconomic outlook, and planned revision to the CPI and GDP series later this month.

Rao noted the governor’s cues about factors behind the recent uptick in bond yields, adding that the central appeared ready to act pre‑emptively if needed. “Looking beyond February, we expect the RBI to maintain an extended pause, supported by a positive cyclical upswing and confidence effects stemming from the successful conclusion of US trade negotiations,” she said.

Madan Sabnavis, Chief Economist, Bank of Baroda said that despite the RBI’s assurance on liquidity, no specific measures were announced indicating need-based interventions.

Sabnavis highlighted the central bank’s recent move to raise the collateral‑free loan limit to Rs 20 lakh as a follow‑up to Budget measures for MSMEs.

“We expect that the rate cycle has ended and 5.25 per cent repo rate will be maintained for some time, and the next move is more likely in upward direction if inflation turns out to be higher in future,” Sabnavis said.

“The RBI’s rate pause gave much-needed stability to the real estate sector at a time when growth expectations have strengthened following the Union Budget’s thrust on higher government spending,” added Prashant Sharma, President, NAREDCO Maharashtra.

Rajani Sinha, Chief Economist, CareEdge Ratings, estimated that the recently proposed tariff reductions from the India-US trade deal could add roughly 20 basis points to GDP growth.

The ratings agency raised its FY27 growth projection to about 7.2 per cent, with CPI inflation estimates averaging close to 4 per cent.

“We expect the RBI to continue liquidity injection measures, particularly in the second half of March when tax-related outflows typically intensify. A comfortable liquidity condition is critical for transmission of the previous rate cuts. On the external front, easing trade policy uncertainties after the recent trade deals are likely to lend some support to the rupee,” Sinha added.

The MPC revised up its average growth projection for the first half of FY27 by 20 basis points to 7 per cent, while raising CPI inflation projections for FY26 and H1FY27 by 10 basis points each.

IANS