By Jaspreet Kalra and Abinaya V
MUMBAI, Feb 6 (Reuters) – The Reserve Bank of India (RBI) kept its key repo rate unchanged on Friday, as expected, amid strong economic growth and reduced tariff pressures following a trade deal with the United States.
A breakthrough agreement between Washington and New Delhi, announced earlier this week, includes a reduction in U.S. tariffs on Indian imports from nearly 50% to 18%, easing a key pressure point for India’s economy and markets.
The RBI’s six-member monetary policy committee voted unanimously to keep the repo rate at 5.25%, in line with the consensus view in a Reuters poll. The monetary policy stance was retained at “neutral”, suggesting rates will stay low for some time to come. External headwinds have intensified but the successful completion of the trade deal with the U.S. augurs well for the economy, Reserve Bank of India Governor Sanjay Malhotra said in his policy statement. Inflation remains benign, he added.
Going forward the rate panel will be guided by the outlook for growth and inflation, Malhotra said.
The central bank has now cut rates by a total of 125 basis points since February 2025, the most aggressive easing since 2019. It cut rates by 25 basis points at its last meeting in December.
India remains one of the world’s fastest‑growing major economies, bolstered by strong domestic demand, public infrastructure spending and a relatively resilient services sector.
The economy is expected to grow 7.4% in the current financial year and the government’s economic adviser has forecast growth at 6.8%-7.2% next year.
While trade tensions with the U.S. have been a drag on the world’s fifth-largest economy, the U.S. has agreed to cut tariffs on Indian imports in exchange for India halting Russian oil purchases and lowering trade barriers.
Inflation in India has been low and expected to average close to 2% in the current financial year, below the central bank’s target of 4%. In December, retail inflation stood at 1.33%, the highest in three months.
India’s benchmark 10-year bond yield moved higher as the RBI did not announce any measures, and was up 5 basis points at 6.70%. The rupee stayed higher at 90.26 against the dollar. Indian stock indices were down 0.5% each.
GROWTH STRONG, STABLE INFLATION
The central bank did not provide a full-year GDP forecast for the next financial year as a new data series – with changes in the base year and basket of goods – will be rolled out soon.
The central bank, however, expects growth in the April-June 2026 quarter at 6.9% and at 7% in the subsequent three months.
The government’s economic adviser has forecast growth in a range of 6.8%-7.2% for next year.
Recent trade agreements, including one with the EU and an impending one with the U.S. will support exports and growth, Malhotra said.
The central bank’s inflation projection for the current financial year was raised marginally to 2.1% versus 2% earlier.
In the first and second quarters of next year, inflation is forecast at 4% and 4.2%, respectively. A projection for the full financial year will be released in April, Malhotra said.
India will roll out a new retail inflation data series starting February, which has a lower weight of food articles and uses 2023-24 as the base year.
(Reporting by Jaspreet Kalra and Abinaya V in Mumbai; Additional reporting by Dharamraj Dhutia in Mumbai; Writing by Ira Dugal; Editing by Jacqueline Wong and Mrigank Dhaniwala)
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