RBI Governor Sanjay Malhotra has announced the decision on repo rate. This time the Reserve Bank has maintained the repo rate at 5.25% only. Apart from this, the Central Bank has increased the estimate of Consumer Price Index (CPI) inflation for the current financial year (2026-27) from 4.5% to 5.1%, while it has reduced the estimate of real GDP growth rate from 6.9% to 6.6%.
Why did the Reserve Bank increase inflation estimates?
Pressure from rising crude oil prices – Due to the ongoing tension in West Asia, crude oil prices remain high in the international market, which may increase the cost of fuel and logistics in India.
Strengthening of the Dollar – Due to the fall in the value of the Indian Rupee against the US Dollar, imports of essential commodities have become expensive for India.
Weather and agricultural production – There is a risk of prices of food items like pulses and vegetables increasing due to extreme heat and uncertainty over the monsoon.
GDP growth estimate reduced
The Reserve Bank has revised its estimates for all quarters of the current financial year:
First quarter (Q1 FY27) – declined from 6.8% to 6.6%
Second quarter (Q2 FY27) – declined from 6.7% to 6.3%
Third quarter (Q3 FY27) – declined from 7.0% to 6.5%
Fourth quarter (Q4 FY27) – declined from 7.2% to 6.8%
What effect will it have on the common man?
Rising inflation and high interest rates affect the country’s economic growth rate (GDP growth rate) by slowing down the pace of development. This is the reason why RBI has reduced its GDP growth estimates for the current financial year. Due to increase in inflation from 4.5% to 5.1%, food items, petrol, diesel and daily essentials will become expensive. The common man may now have to spend more than before on essential items. This will reduce the demand in the market, which will have a direct impact on the growth rate.
