RBI Governor Sanjay Malhotra on Friday characterised India’s current macroeconomic moment as a “rare goldilocks period”, that marks high economic growth and exceptionally low inflation.
The RBI reduced the policy repo rate by 25 basis points to 5.25 per cent, following a unanimous decision of the Monetary Policy Committee (MPC) at its meeting held from December 3 to 5. The committee cited strong growth indicators and sharply lower inflation as key factors enabling the rate cut.
Announcing the decision, RBI Governor Sanjay Malhotra said the MPC had undertaken a detailed review of the evolving macroeconomic situation before deciding to lower the policy rate with immediate effect. The last policy review on October 1 had kept the repo rate unchanged at 5.5 per cent.
GDP Forecast Raised to 7.3% for FY26
Alongside the rate decision, the RBI raised its GDP growth projection for FY 2025–26 to 7.3 per cent, up by 0.5 percentage points from the earlier estimate.
For the remaining quarters of the fiscal, GDP growth is projected at 7 per cent in Q3 and 6.5 per cent in Q4. For Q1 and Q2 of FY27, growth is projected at 6.7 per cent and 6.8 per cent respectively.
Malhotra said domestic economic activity remains resilient, supported by robust rural demand and improving urban consumption. India’s real GDP expanded 8.2 per cent in Q2, the highest in six quarters, aided by strong consumption and the GST rate rationalisation carried out in September 2025.
Inflation Outlook Revised to 2%
The RBI also revised its CPI inflation projection for FY26 downward to 2 per cent, a reduction of 0.6 percentage points from the earlier outlook.
Headline inflation fell to a record low of 0.25 per cent in October 2025, driven mainly by a correction in food prices.
Malhotra said food supply conditions have improved due to higher kharif output, healthy rabi sowing, adequate reservoir levels and favourable soil moisture. Core inflation remained contained despite price pressures from precious metals, which alone contributed about 50 basis points to the headline number.
Quarterly inflation is projected at 0.6 per cent in Q3 and 2.9 per cent in Q4, rising to 3.9 per cent in Q1 FY27 and 4 per cent in Q2, staying within the RBI’s 2-6 per cent target band.
Liquidity Measures Announced
To support liquidity, the RBI announced open market operation (OMO) purchases of government securities worth ₹1 lakh crore and a three-year USD 5 billion buy-sell swap. Malhotra said these measures will ensure adequate durable liquidity and aid monetary transmission.
India’s foreign exchange reserves stand at USD 686.2 billion, providing more than 11 months of import cover. The RBI said the external sector remains stable and external financing needs will be met comfortably.
A ‘Goldilocks’ Phase
Malhotra described the present macroeconomic situation – GDP growth at 8 per cent in H1 FY26 and inflation at 2.2 per cent – as a rare “goldilocks period” of high growth and low inflation. He said this favourable balance created the policy space for the MPC to support economic momentum through a rate cut.
Consumer Grievances and Customer Service
The Governor also urged banks and NBFCs to prioritise customer service and reduce grievances. He announced a two-month campaign starting January 1 to clear all complaints pending for more than a month with the RBI Ombudsman.
RBI’s latest Integrated Ombudsman Scheme Annual Report showed consumer complaints rising to 13.34 lakh in FY25, up 13.55 per cent from the previous year. Loans and advances accounted for the largest share of complaints (29.25%), followed by credit card issues, which rose sharply by 20.04 per cent. Banks formed 81.53 per cent of total complaints, while NBFCs accounted for 14.80 per cent.
(With ANI inputs)
