The Reserve Bank of India (RBI) has upgraded its real GDP growth estimate for FY 2025-26 to 7.4 per cent, reflecting robust domestic consumption, steady investments, and supportive government spending, even as global uncertainties persist. In its latest Monetary Policy Committee (MPC) decision, the central bank opted to maintain the policy repo rate unchanged at 5.25 per cent, adopting a neutral stance to balance inflation control with economic expansion.

Governor Sanjay Malhotra emphasized that India’s economy is navigating a “Goldilocks phase” – strong yet not overheated – bolstered by healthy corporate balance sheets, benign core inflation (excluding volatile precious metals), and improved agricultural output. The decision comes amid rupee pressures and commodity fluctuations, but strong high-frequency indicators like GST collections and PMI data underpin the optimistic outlook.

Quarterly projections show momentum building: 7% growth in Q3 FY26 and 6.5% in Q4, with early FY27 estimates at 6.9% for Q1. This upgrade factors in front-loaded capital expenditure, GST rationalization benefits, and softer crude prices aiding household spending. However, the MPC remains vigilant on risks like geopolitical tensions and potential food price moderation easing.

Market reactions were positive, with bond yields stabilizing and equity benchmarks gaining on growth optimism. Borrowers and investors can expect continuity in lending rates, supporting MSME credit expansion – RBI also hiked collateral-free loans to ₹20 lakh. Analysts view this as a “pause with purpose,” prioritizing transmission of prior rate adjustments before further easing.

For state economies, this bodes well for J&K and other regions reliant on central capex in infra and tourism revival. The policy reinforces India’s high-growth trajectory, positioning it as a bright spot amid global slowdown fears.