The meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), consisting of six members, began on Monday amid expectations that the current repo rate level will be maintained. The MPC's decision is scheduled to be announced on August 5th.
Despite steady domestic economic growth, most experts predict that the MPC will adopt a cautious approach due to ongoing global uncertainty and inflation risks.
In June, the central bank kept the key rate unchanged at 5.25 percent, adopting a wait-and-see stance as policymakers assessed the consequences of the conflict in the Middle East. The central bank raised its forecast for retail inflation for 2026-27 to 5.1 percent from the previous 4.6 percent, linked to rising commodity costs caused by higher global energy prices being passed on to retail prices for gasoline and diesel.
However, it lowered the GDP forecast for the fiscal year 27 to 6.6 percent compared to the 6.9 percent estimate made in April.
Expert Opinions on Monetary Policy
Sanjay Malhotra, RBI Governor, will announce the results of the two-month meeting on August 5th. Madan Sabnavis, Chief Economist at Bank of Baroda, noted that monetary policy is being decided amidst persistent global uncertainty and a lack of clarity regarding the end of the war. He emphasized that crude oil prices and currency will remain volatile and unpredictable.
Sabnavis added that despite gradual inflation growth, which is likely to continue due to food price increases driven by seasonal factors and monsoons, growth remains stable according to high-frequency indicators. In light of this, the MPC is likely to maintain the status quo regarding both the repo rate and the overall stance.
Dipti Deshpande, Senior Director and Chief Economist at Crisil Ltd, also expects the central bank to keep rates unchanged in the August review. In her view, although the MPC may acknowledge emerging inflationary risks, it would prefer to wait for greater clarity on the impact of two major shocks—the protracted conflict in the Middle East and ongoing monsoon-related uncertainty—on growth dynamics and inflation. Both these factors pose risks to growth and inflation prospects, presenting policymakers with an increasingly complex choice.
D K Srivastava, Chief Policy Advisor at EY India, forecasts Q1 growth between 7.1 and 7.3 percent. Meanwhile, the average Consumer Price Index (CPI) for the April-June period remained close to the MPC's target of 4 percent. Srivastava stated that monetary policy is likely to keep the repo rate at 5.25 percent in the August 2026 review, and future RBI rate decisions will depend on data, given the continued uncertainty regarding crude oil prices related to the situation in the Middle East.
Vinay Pai, Managing Director and Head of Fixed Income at Equirus Capital, believes that upcoming monetary policy will primarily be determined by domestic inflation indicators, liquidity conditions, and economic growth, rather than following global monetary policy developments. However, if high global yields persist and portfolio debt inflows slow down, the RBI is likely to maintain a neutral and cautious policy stance rather than aggressively cutting rates.
Pradip Aggarwal, Founder and Chairman of Signature Global (India), noted that the MPC meeting takes place against a backdrop of heightened global uncertainty caused by geopolitical tensions, trade disruptions, and commodity price volatility. He also stressed that the favorable interest rate environment has stimulated the entry of many homebuyers into the market, both for first-time and end-use purchases. According to him, maintaining this supportive policy will help strengthen housing demand, boost allied sectors, and continue to contribute significantly to India's economic growth.
Mandar Pitale, Head of Financial Markets at SBM Bank (India), believes that the current growth and inflation dynamics point to growth risks alongside a managed inflation trajectory in the near future. Combined with increased global uncertainty, this may lead the MPC not to rush towards a rate hike at the upcoming August meeting.
Shrikant Goyal, Co-founder of Getfive, noted that although inflation has risen slightly in recent months, it remains within the RBI's manageable range. Consequently, he expects the central bank to maintain the status quo on interest rates, which will provide substantial support to the MSME sector and the economy as a whole.
