Key Economic Developments: RBI Holds Rates, GDP Growth Surprises
Weekly economy wrap: RBI pause, GDP beat frame week of policy shifts
Image: Business Standard
The Reserve Bank of India maintained the repo rate at 5.25% while India's GDP grew by 7.8% in Q4FY26, leading to a full-year growth of 7.7%. Policymakers remain vigilant about inflation and external trade risks, particularly due to the West Asia conflict.
- 01The RBI's repo rate remains unchanged at 5.25% for the third consecutive review.
- 02India's GDP growth for Q4FY26 was reported at 7.8%, with an annual growth of 7.7%.
- 03The RBI has raised its FY27 inflation forecast to 5.1% due to food and fuel price pressures.
- 04Manufacturing PMI improved to 55 in May, while Services PMI reached a six-month high of 59.8.
- 05The Union Cabinet approved a ₹10,000 crore fund to stabilize aviation fuel costs.
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The week in India's economy was marked by the Reserve Bank of India's (RBI) decision to keep the repo rate steady at 5.25%, maintaining a neutral stance amid rising inflation concerns. The RBI's revised inflation forecast for FY27 is now 5.1%, reflecting pressures from food and fuel prices, particularly due to the ongoing conflict in West Asia. India's GDP growth surprised analysts, expanding 7.8% in Q4FY26 and achieving a full-year growth of 7.7%. However, the RBI has lowered its growth forecast for FY27 to 6.6%, anticipating a slowdown linked to fuel price volatility. The Manufacturing PMI rose to 55 in May, indicating a three-month high, while the Services PMI reached 59.8, supported by demand in sectors like IT and e-commerce. In policy developments, the Union Cabinet approved a ₹10,000 crore fund aimed at stabilizing aviation turbine fuel costs and a ₹9,585 crore scheme for cleaner vehicle transitions in Delhi-NCR. Additionally, domestic LPG prices increased by ₹29 per 14.2 kg cylinder, now costing ₹942 in Delhi, due to global fuel pressures.
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The RBI's decisions and economic indicators suggest a stable yet cautious economic environment, affecting consumer prices and investment strategies.
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