Policy decision expected Friday amid strong growth and low inflation.
The financial eyes of the nation are fixed on Mumbai today as the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) commences its crucial three-day deliberation. Starting this Wednesday, the high-stakes meeting will evaluate the country's economic trajectory, culminating in a definitive policy announcement on Friday, December 5.
RBI Governor Sanjay Malhotra is scheduled to reveal the committee's decision at 10:00 AM on Friday. The committee members are set to engage in deep discussions regarding the path forward for interest rates, analyzing a unique mix of economic indicators that define the current fiscal landscape.
A Unique Economic Scenario
This round of meetings is happening against a backdrop of impressive economic performance. The Indian economy is currently showcasing robust health, with the Gross Domestic Product (GDP) for the second quarter of the 2025-26 financial year (July-September) clocking in at a strong 8.2 per cent.
Simultaneously, the country is witnessing a significant cooling of prices. Data released by the Ministry of Statistics and Programme Implementation (MoSPI) indicates that retail inflation plummeted to a record low of just 0.25 per cent in October 2025.
What Are the Predictions?
Despite the dramatic drop in inflation, which typically encourages central banks to lower interest rates, market experts believe the RBI might hold its horses. A recent analysis by the Bank of Baroda suggests that the central bank is likely to maintain the status quo. The report anticipates that the repo rate will remain unchanged at 5.50 per cent, with the RBI maintaining a "neutral" stance.
The reasoning behind this prediction lies in the strength of the economy. The Bank of Baroda report highlighted that the 8.2 per cent GDP growth exceeded market forecasts. While the sharp decline in food prices has pushed CPI inflation to a series low—potentially even below the RBI’s own projections—the strong growth figures give the central bank room to remain cautious rather than rush into a rate cut.
The Expert Dilemma
Mehul Pandya, the Managing Director and Group CEO of CareEdge Ratings, explained the complexity of the current situation. He noted that the RBI is facing two contradictory signals.
Usually, when an economy is booming with high GDP growth, central banks avoid cutting rates to prevent overheating. However, when inflation hits rock bottom, the standard playbook suggests cutting rates to stimulate prices. Pandya points out that these "mutually opposing forces" make this week's decision particularly interesting, though caution seems to be the likely winner given the strong economic activity.
All eyes are now on Governor Malhotra’s address this Friday to see how the central bank balances these competing economic realities.
With Agency Inputs
