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MUMBAI (PTI): India’s macroeconomic fundamentals in the medium term remain sound and robust amid volatile financial markets, Central Bank of India Governor Sanjay Malhotra said after all MPC members voted in favor of keeping policy rates unchanged at a meeting earlier this month.

According to the minutes of the Monetary Policy Committee (MPC) meeting released by the Reserve Bank of India (RBI) on Friday, most members, including the governor, agreed that the current interest rate is “appropriate” given the current growth rate and inflation dynamics.

The MPC meeting held from February 4th to 6th decided to keep the short-term lending rate (repo) unchanged at 5.25%.

The minutes quoted Malhotra as saying that global economic growth is expected to be slightly higher in 2026, supported by a surge in technology investment, favorable fiscal and monetary policies, and accommodative financial conditions, despite the significant challenges posed by intensifying geopolitical tensions and rising trade tensions.

Inflation outcomes may still vary from country to country. Central banks are therefore likely to take different policy paths as they approach the end of the easing cycle, he added.

“Global investor sentiment has become nervous due to large-scale fiscal stimulus and geopolitical uncertainty, and financial markets remain unstable,” the governor said.

Overall, India’s macroeconomic fundamentals over the medium term, including the external sector, remain sound and robust, he said, adding that in terms of inflation and growth dynamics, “we are in the same or slightly better position than during the last policy”.

He said that while the inflation outlook remained largely unchanged, the growth outlook had improved and some recent external developments had created room for more optimism.

“Given the current state of the economy and its outlook, i.e. strong growth and moderate inflation, I believe the current policy rate is appropriate. Therefore, I will remain neutral by voting for the continuation of the policy repo rate at 5.25%,” Malhotra added.

Poonam Gupta, MPC member and vice president, opined that the preliminary growth forecasts for 2026-27 by various agencies have been revised upwards, supported by continued strength in high-frequency indicators and model-based forecasts.

The RBI has also slightly raised its real GDP growth forecast for the first and second quarters of 2026-27, guided by the positive short-term outlook and trade deals.

“We have already cut policy rates by a cumulative 125 basis points in four of the past six meetings, and the last rate cut announced in December 2025 is yet to be transmitted. As we await new series of data on both gross domestic product (GDP) and inflation, further rate cuts do not seem warranted at this time,” said Governor Gupta.

After comprehensively considering the domestic macroeconomic situation and future outlook, the MPC expressed the view that the current policy interest rate was appropriate, and voted in favor of continuing the current policy rate.

RBI Director-General and MPC member Indranil Bhattacharya also voted in favor of keeping policy rates at current levels, but said inflation excluding precious metals is expected to remain benign for some time.

He also favored maintaining a neutral stance on monetary policy, which would provide flexibility to respond appropriately to changing circumstances.

In addition to the three members of the RBI, the MPC has an equal number of external members. External members Nagesh Kumar, Saugata Bhattacharya and Ram Singh all supported continuation of the repo rate at 5.25%.

According to minutes of the meeting, Kumar said that the outlook for India’s economy has become much brighter since the December 2025 MPC meeting.

The long-pending EU-India FTA negotiations were concluded on January 27, and the US-India trade agreement was announced soon thereafter, contributing to an improvement in market sentiment that had been depressed due to the US imposing 50% tariffs on Indian exports from August 2025.

This momentum was further accelerated by the proposed Federal Budget 2026-27, which includes fostering manufacturing, tourism, hospitality and new data center policies, while maintaining a strong thrust on infrastructure capital spending.

“Collectively, these developments have significantly raised India’s economic outlook,” he added.

Kumar also said that the most important implication of the new trade deal is that it brings India back to the table as the most promising destination for China+1 supply chain restructuring.

He is the Director and Chief Executive of the Institute of Industrial Development, New Delhi.

Bhattacharyya, a prominent economist, said the MPC resolution projects that CPI (retail) inflation will reach the target in the first half of 2027.

“My assessment is that the risk of further inflationary pressures, not just higher inflation, is building up. Nevertheless, the good news is that household inflation expectations remain anchored.”

He said that assessing the macro-financial environment while awaiting a series of new economic indicators, the current policy interest rate is appropriate.

He also highlighted that the growth in bank lending to the non-retail sector is gradually increasing, which, together with stable manufacturing capacity utilization and signs of fiscal stimulus boosting consumer demand, could portend a gradual recovery in private sector capital investment.

Ram Singh said that while the inflation outlook remains largely unchanged, the growth outlook is improving.

Moreover, some recent developments on the external front provide scope for more optimism.

“Given the current state of the economy and its outlook, i.e. strong growth and moderate inflation, I believe the current policy rate is appropriate. Therefore, I will remain neutral by voting for continuation of the policy repo rate at 5.25%,” said Singh, director of the Delhi School of Economics.

The next meeting of RBI’s interest rate setting committee, MPC, is scheduled from April 6 to 8, 2026.