RBI MPC Policy: CPI Inflation Target Cut Below 2%, GDP Growth Target Hiked To 7.3% For FY26

RBI Inflation, GDP Data: The Reserve Bank of India's Monetary Policy Committee (MPC) has trimmed both core and retail inflation projections while upgrading the country's growth outlook amid improving macroeconomic conditions. The consumer price index (CPI) inflation estimates for Financial Year 2026-26 (FY 26) have been reduced to 2% from 2.6%, whereas the GDP growth forecast has been increased to 7.3% for the same duration, said the Reserve Bank of India Governor, Sanjay Malhotra, on Friday, December 5.

The core and headline inflation is likely to remain below 5% in the first half of the financial year 2026-26, whereas the growth rate may soften to some extent, added Malhotra. The RBI MPC announced a 25 basis points repo rate cut to take the repo rate at 5.25%.

RBI GDP Growth Forecast

The RBI has also revised GDP growth forecast for FY26 and the upcoming quarters. FY 26 GDP growth forecast has been revised to 7.8%.

Period	Earlier	Revised
FY26	6.8%	7.3%
Q3 FY26	6.4%	7.0%
Q4 FY26	6.2%	6.5%
Q1 FY27	6.4%	6.7%
Q2 FY27	–	6.8%

The RBI MPC, in its October meeting, had cut its FY26 inflation forecast to 2.6% from 3/1%, second quarter inflation projections to 1.8%, third quarter inflation projections at 1.8%, and fourth quarter inflation projection to 4%. Whereas the CPI inflation forecast for the first quarter of FY27 stood at 4.5%, down from 4.9%.

More than 40 economists in a GoodReturns poll survey voted in favour of another 25 bps repo rate cut by the RBI in December to 5.25%.

Over 86 per cent of the 50 poll participants expected a cut despite a decade-low inflation, strong GDP growth prospects, and stable financial markets. This comes at a time when global investors await the US Federal Reserve's policy decision in the second week of December.

India's Inflation at Record Low

Inflation in India remained at record low in October due declining food costs and favourable impact of Goods and Services Tax (GST) revision. The consumer price index (CPI) inflation, also known as retail inflation stood at 0.25% in October, as per the data released by the Ministry of Statistics and Programme Implementation in November.

India's Consumer Price Index (CPI) inflation data dropped to a multi-year low as the food inflation dipped further to -0.5% in October. "There is decrease of 119 basis points in headline inflation of October, 2025 in comparison to September, 2025. It is the lowest year-on-year inflation of the current CPI series," as per MOSPI press release.

The gap between headline and food inflation widened sharply in October 2025, as food prices saw a steep decline during the month. Consumer Food Price Index (CFPI) stood at -5.02% in October against -2.33% in September this year. Whereas, food inflation in October 2024 stood at 6.21%.

Food deflation in November declined due to favourable impact of revised GST rates, favourable base effect and drop in inflation of oils and fats, vegetables, fruits, egg, footwear, cereals and products, transport and communication, etc.