RBI Holds Rate at 5.25%, Raises FY27 GDP Growth Forecast to 6.7%

India's Monetary Policy Committee unanimously voted to hold the repo rate at 5.25% on 5 August, while raising its FY27 GDP growth forecast to 6.7%, up from an earlier 6.6% estimate, citing resilient domestic demand and a recovery in exports.

A rare combination: holding rates while raising growth expectations

Central banks more commonly raise growth forecasts alongside rate cuts (to support growth further) or hold rates specifically because growth already looks strong enough without help. The RBI's decision to hold rather than cut, even while turning more optimistic on growth, suggests confidence that current policy is already well-calibrated rather than needing further stimulus.

What's driving the improved outlook

The RBI pointed to strong domestic demand, healthy manufacturing output, and a solid recovery in merchandise exports during the first quarter as the basis for the upgraded forecast — broad-based strength across multiple parts of the economy rather than a single standout sector.

Why the RBI stayed cautious despite the upgrade

The unanimous "neutral" stance reflects continued caution around global geopolitical uncertainty, with officials indicating they want better visibility on retail price trends before making the next move in either direction — a reminder that a stronger growth forecast doesn't automatically mean a shift toward rate cuts, if inflation risk remains a live concern.