It may seem counter-intuitive that India’s Monetary Policy Committee (MPC) should hold the repo rate at 5.5 per cent despite revising both its inflation and growth projections downwards.

But the pause seems to be a pragmatic decision. Except during Covid when they fell to 4 per cent, 5 per cent has been the effective floor for India’s policy rates given normal inflation rates of 5-6 per cent.

The Reserve Bank of India (RBI) also knows fully well that the projections made in its policy reviews are just lines in the sand subject to monsoon performance, global trade dynamics, geopolitics and other imponderables.

In this review, RBI has reduced its inflation projection to 2.6 per cent for FY26 from the 3.1 per cent in the August review.

The real GDP growth estimate is now at 6.8 per cen

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