New Delhi | Nov 29, 2025 |Sky Link Times |
As the Reserve Bank of India (RBI) prepares for its upcoming monetary policy review next week, expectations are running high across markets and industry circles. With inflation at an unprecedented low and economic growth on a strong upward trajectory, economists believe the central bank faces one of its closest policy calls in recent quarters.
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Inflation at Record Low, Growth at Multi-Quarter High
India’s real GDP is estimated to grow by 8.2% in Q2 of FY 2025-26, a sharp rise from 5.6% in the same quarter last year.
At the same time, consumer inflation has cooled dramatically.
The Consumer Price Index (CPI) fell to just 0.25% year-on-year in October, marking the lowest inflation print in the current CPI series. This rare combination of high growth and minimal inflation has strengthened expectations of a potential policy shift.
Economists: A ‘Close Call’ for RBI
Despite the favourable indicators, economists remain split on whether the RBI will opt for a rate cut.
Madan Sabnavis, Chief Economist at Bank of Baroda, said the current real repo rate of 1–1.5% suggests policy rates are already at a “fair level”.
He added:
> “Under these conditions, we do not think there should be any change in the policy rate.”
However, Sabnavis noted that the RBI may consider Open Market Operations (OMOs) in December to support liquidity as advance tax payments drain out funds.
He also expects minor adjustments in RBI’s forecasts:
Inflation: downward revision of 0.1%–0.2%
GDP: upward revision of 0.1%–0.2%
RBI Governor Hints at Possible Rate Cut
RBI Governor Sanjay Malhotra earlier suggested that there may be headroom for a repo rate cut due to favourable macroeconomic conditions.
He emphasized the RBI’s dual mandate:
Price stability
Growth support
Malhotra noted the central bank aims to maintain balance, saying:
> “We don’t remain aggressive on growth, nor do we remain defensive.”
The RBI has kept the repo rate unchanged in the August and October reviews. Prior to that, it reduced the rate by 100 bps, from 6.5% to 5.5%, between February and June.
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Global Analysts Expect a Rate Cut
International financial major Morgan Stanley predicts the RBI will cut the repo rate by 25 basis points, bringing it down to 5.25% at the next MPC meeting.
According to analysts, the RBI may adopt a more data-dependent policy stance thereafter, maintaining a cautious but forward-looking approach as the economy stabilizes.
Conclusion
With inflation at historic lows and growth surpassing expectations, the RBI faces a compelling but delicate decision in its upcoming policy review. Whether the central bank opts for a rate cut or maintains its cautious stance, the move will significantly shape India’s financial and economic outlook for FY26.
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