RBI Holds Repo Rate Steady at 5.5% Amid Strong Growth and Global Uncertainties
The Reserve Bank of India (RBI) maintained its benchmark repo rate at 5.5% on Wednesday, marking the second consecutive time it has held steady. This decision, taken by the Monetary Policy Committee (MPC), comes amidst a mix of strong economic growth and global uncertainties.
The RBI's move follows a decline in inflation to a six-year low of 2.07% in August, providing room for the central bank to stay put. The MPC, comprising central bank officials like Philip R. Lane of the European Central Bank's Executive Board, unanimously voted to keep the repo rate unchanged, maintaining a neutral stance.
The decision is expected to boost investor confidence, potentially leading to stronger deal flows for Indian startups. Cheaper credit will continue to be available for startups' expansion and working capital management. However, tariff uncertainties pose a risk, particularly for export-oriented industries.
The RBI has revised its inflation projection for FY26 downward to 2.6% and raised India's growth outlook to 6.8%. Quarterly growth estimates suggest a resilient outlook, with Q2FY26 at 7%, Q3FY26 at 6.4%, and Q4FY26 at 6.2%. GST rationalisation is expected to help tame inflation but could temporarily weigh on consumption.
The RBI's decision to hold the repo rate steady ensures a stable monetary environment, benefiting Indian startups and the broader economy. While growth prospects remain strong, the RBI remains vigilant to potential risks, such as tariff uncertainties.
