The Reserve Bank of India left its key policy rate unchanged at 5.25% on Friday, the central bank said after a unanimous vote by its six-member monetary policy committee. The decision matched expectations from market observers and the consensus view in a Reuters poll.
Policy was described as remaining on a "neutral" footing, language that signals an ongoing period of relatively accommodative interest-rate settings. The central bank has moved to ease policy since February 2025, cutting rates by a cumulative 125 basis points. Its most recent adjustment prior to this meeting was a 25-basis-point reduction at the December policy meeting.
In its policy statement Reserve Bank of India Governor Sanjay Malhotra said external headwinds have intensified, but that a recently announced trade pact with the United States provides a positive development for the economy and for markets. The deal includes a reduction in U.S. tariffs on Indian imports from nearly 50% to 18%, removing a significant tariff-related pressure point cited by policymakers.
Governor Malhotra also described inflationary pressures as benign. Official projections in the policy communication indicate inflation in the current financial year is expected to average close to 2%, well under the RBI's 4% target. Retail inflation in December was recorded at 1.33%, which the central bank noted was the highest reading in three months.
The statement reiterated that India remains one of the fastest-growing major economies, driven by robust domestic demand, active public infrastructure spending and a services sector that has shown resilience. The economy is projected to expand by 7.4% in the current financial year, while the government’s economic adviser has set a forecast range of 6.8% to 7.2% for the following year.
The U.S.-India trade agreement was described in the policy note as involving reciprocal measures: the United States agreed to lower tariffs on Indian imports, and India agreed to stop purchasing Russian oil and to reduce certain trade barriers. Policymakers framed the package as easing a previously significant source of economic friction.
The combination of sustained growth, subdued inflation readings and the easing of tariff pressures underpinned the RBI's decision to keep policy rates steady and maintain a neutral stance, indicating that officials expect to keep borrowing costs relatively low for some time while monitoring external developments.