RBI Bulletin October 2026

 

Monetary Policy Statement, 2026-27 Resolution of the Monetary Policy Committee (MPC) October 5 to 7, 2026*

Monetary Policy Decisions

The Monetary Policy Committee (MPC) held its 63rd meeting from October 5 to 7, 2026, under the chairmanship of Shri Sanjay Malhotra, Governor, Reserve Bank of India. The MPC members Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta and Shri Indranil Bhattacharyya attended the meeting.

After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC voted unanimously to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 bps to 5.50 per cent. Consequently, the standing deposit facility (SDF) rate stands adjusted at 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.75 per cent. The MPC also decided to change the stance to calibrated tightening.

Growth and Inflation Outlook

Global Outlook

Since the last MPC meeting in August 2026, the re-escalation of the conflict in West Asia and the consequent sharp volatility in crude oil prices has kept the global economy in a state of flux. Global growth has remained resilient. Acceleration of inflation in key economies has prompted a shift towards hawkish monetary policy. The US Fed hiked by 25 bps in September. The Fed commentary thereafter along with rate tightening by major systemically important central banks have reinforced expectations of higher global policy rates. Tighter global financial market conditions coupled with fiscal sustainability concerns in major economies are keeping global bond yields at record high levels. With a resolution of the West Asia conflict remaining elusive, significant downside risks to the global outlook remain, including further tightening of global financial conditions, continuing elevated AI-related asset valuations and high public debt.

Domestic Outlook

Notwithstanding these persisting global headwinds, the Indian economy has remained resilient. As per National Statistics Office (NSO) estimates, real GDP growth in Q1:2026-27 at 7.8 per cent was higher than expected. Strong private consumption and fixed investment, rebound in merchandise exports and sustained buoyancy in services exports supported growth. On the supply side, the manufacturing sector grew at a robust pace. Services sector activity strengthened further, owing to buoyant domestic and external demand.

In Q2, available high frequency indicators for July–August suggest sustained momentum in domestic economic activity. Domestic demand remains resilient and is well supported by robust external demand with merchandise exports registering double-digit growth.

Looking ahead, global economic uncertainty will continue to have some bearing on domestic economic activity. While energy prices and supply chain pressures have continued, their near-term trajectory remains uncertain amidst the lingering West Asia conflict. Their adverse impact is being contained with active diversification of supply sources. Deficient south-west monsoon and strong El Niño conditions pose risks to agriculture sector’s outlook and rural demand, although healthy buffer of foodgrains and proactive policy interventions by the government are expected to mitigate the impact. Furthermore, continuing momentum in services and broadly stable employment conditions are likely to support urban demand. Strong capacity utilisation, robust credit flows and the government’s thrust on infrastructure are expected to sustain investment activity. While services exports are expected to remain buoyant, bilateral trade agreements should boost merchandise exports.

Taking all these factors into consideration, real GDP growth for 2026-27 is projected at 7.1 per cent, with Q2 at 7.2 per cent; Q3 at 6.9 per cent and Q4 at 6.8 per cent. Real GDP growth for Q1:2027-28 is projected at 7.1 per cent. The risks are evenly balanced (Chart 1).

CPI inflation increased to 4.8 per cent in August 2026 from 4.5 per cent in July. While the increase has been predominantly on account of higher inflation in food and fuel groups, core inflation has also picked up indicating some signs of widening price pressures. Food price increases have become more broad based along with notable spikes in certain items such as sugar and onion. The uptick in fuel inflation in August largely reflected unfavourable base effects. Core inflation increased to 4.2 per cent and core inflation, excluding precious metals, increased to 2.9 per cent in August. The weighted share of items in headline CPI recording inflation above 4 per cent increased steadily to about 37 per cent in August.

The near-term outlook on inflation points towards continued pressures from supply side on account of the deficient monsoon, ongoing El Niño conditions and high energy and other commodity prices, the pass through of which is still continuing. Considering all factors, CPI inflation is projected to be 5.2 per cent for 2026-27 with Q2 at 4.9 per cent; Q3 at 6.0 per cent; and Q4 at 5.7 per cent (Chart 2). Inflation for Q1:2027-28 is projected at 5.6 per cent with risks being evenly balanced. Core inflation is projected at 4.4 per cent for 2026-27.

Rationale for Monetary Policy Decisions

The MPC noted that the global context on account of geopolitical developments remains challenging. Nonetheless, the Indian economy has been strong. The economic momentum remains broad-based. The economy is expected to remain resilient.

In the light of available data, it is clear that inflation and its outlook are not benign as they were last year with headline CPI inflation expected to average almost 5.8 per cent in the next three quarters and core inflation projected at 4.4 per cent this year. In this milieu, recalibrating the policy rate is imperative.

As regards supply side inflation, monetary policy primarily acts by curtailing second round effects (inflation expectations and firm level pricing behaviour, etc.), which take time to manifest and are difficult to extract from available data. Apart from data related to inflation expectations and firm level pricing behaviour, indicators of generalisation of inflation like core inflation and diffusion indices are used for this purpose. It may, however, be kept in mind that it is difficult to distinguish between the second-round effects and the indirect impact of supply side pressures (in production cost through energy and other inputs) as both are present in these indicators. While there is some evidence of elevated inflation expectations and generalisation of inflation, there are only limited signs of supply side pressures getting embedded in pricing behaviour.

Similarly, while there is limited evidence of demand side pressures, risks in view of strong growth in monetary and credit aggregates exist.

Considering all these factors, the MPC unanimously voted to increase the policy repo rate by 25 basis points to 5.50 per cent. The MPC also decided to change the stance to calibrated tightening. It only signals that given the current conditions, rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving conditions and the outlook. The duration and extent of rate hike cycle would be contingent on the actual growth-inflation developments and outlook, especially that of underlying inflation, the extent of broadening of price pressures and second round effects of the supply shock, as also the impact of demand impulses.

Two members - Dr. Nagesh Kumar and Prof. Ram Singh - were of the view that the stance be retained at neutral.

The MPC remains committed to its price stability mandate and will endeavour to progressively align inflation with its target.

The minutes of the MPC’s meeting will be published on October 21, 2026.

The next meeting of the MPC is scheduled for December 2 to 4, 2026.

* Released on October 7, 2026.

Executive Summary

Global growth remained resilient in 2026 so far, supported by AI-related investment, and fiscal stimulus measures, despite disruptions due to the ongoing West Asia conflict. Renewed energy-price pressures stoked inflation pressures and prompted a more hawkish stance from leading central bank. Fiscal sustainability concerns, persistent inflation, and geopolitical uncertainty raised bond yields, while equity markets remained volatile amid lingering concern on valuations technology stocks.

Amidst global uncertainty, domestic financial markets underwent intermittent volatility during H1:2026-27. System liquidity surplus surged in September 2026, mainly on account of the Reserve Bank’s swap facilities. Overnight rates in the money market evolved in sync with prevailing liquidity conditions. Transmission to lending and deposit rates plateaued with status quo in policy rate during H1:2026-27. Bank credit growth became broad based and strengthened further.

The domestic economy showed resilience in H1:2026-27, despite continued global uncertainty amidst the conflict. The supply-side pressures were alleviated by proactive policy measures by the government that ensured adequate supply of key inputs. Real GDP recorded a growth of 7.8 per cent in Q1:2026-27 reflecting strong momentum in underlying economic activity. Aggregate demand remained strong on the back of both private consumption and investment. Net external demand was also robust and contributed significantly to growth. On the supply side, both manufacturing and services sectors recorded strong growth in Q1. High frequency indicators suggest continued buoyancy in domestic economic activity, albeit with some moderation compared to Q1. Stable employment conditions, congenial financial conditions, revival in corporate investment, and a pickup in goods exports – nurtured by bilateral FTAs and diversification – are expected to support economic activity going forward. Sustenance of private consumption growth will be essential for broad-based recovery in private capex.

Headline CPI inflation increased sequentially, rising above the target during June-August, driven by a sustained positive price momentum. Food and fuel groups led to this increase, reflecting adverse weather conditions and the sharp rise in energy prices following the West Asia conflict. Core inflation registered a pick-up with some signs of generalisation in recent months. Input cost pressures have accentuated, but the pass-through has remained limited so far.

Going forward, India’s macroeconomic outlook remains resilient supported by domestic demand and strengthening investment, despite persistent global uncertainties. The outlook remains vulnerable to geopolitical developments, volatility in global energy markets and weather-related uncertainties. Weak monsoons coupled with strong El Niño, protracted geopolitical tensions, rising international commodity prices, additional frictions in global trade and tightening of global financial conditions could adversely impact the growth outlook. Persistent supply-side pressures in food and volatile global energy prices pose risks to the domestic inflation outlook, particularly through second-round effects amid strong growth impulses. The interplay of these factors will shape the evolving growth–inflation dynamics, with the balance of risks depending on developments in global growth, crude oil prices, exchange-rate movements, and domestic food supplies.

1. Real GDP Growth Rate & Projections (2026–27)

• Full Year 2026–27 (Projected): 7.1%

• Q1: 2026–27 (Actual): 7.8%

• Q2: 2026–27 (Projected): 7.2%

• Q3: 2026–27 (Projected): 6.9%

• Q4: 2026–27 (Projected): 6.8%

• Q1: 2027–28 (Projected): 7.1%

(Note: Risks to these projections are evaluated as evenly balanced.)

2. Historical Quarterly Real GDP Growth ($y\text{-}o\text{-}y$, %)

Below is the quarterly breakdown of real GDP growth rates as published in Table III.1 and Chart 1 / Chart III.1:

2024–25

• Q1: 2024–25: 6.8%

• Q2: 2024–25: 7.2%

• Q3: 2024–25: 8.3%

• Q4: 2024–25: 10.5%

• Full Year (2024–25): 7.2%

2025–26

• Q1: 2025–26: 6.9%

• Q2: 2025–26: 8.1%

• Q3: 2025–26: 7.7%

• Q4: 2025–26: 8.6%

• Full Year (2025–26): 7.8%

2026–27

• Q1: 2026–27: 7.8%

3. Component-Wise Demand Breakdown for Q1: 2026–27 ($y\text{-}o\text{-}y$ Growth)

• Private Final Consumption Expenditure (PFCE): 7.1%

• Government Final Consumption Expenditure (GFCE): 4.3%

• Gross Fixed Capital Formation (GFCF): 11.9%

• Exports: 12.0%

• Imports: 1.1%

4. Sectoral GVA Growth Rates for Q1: 2026–27 ($y\text{-}o\text{-}y$ Growth)

• Real GVA at Basic Prices: 8.2%

• Agriculture, Forestry, and Fishing: 3.6%

• Industry Sector: 7.7%

  • Mining & Quarrying: -2.4%

  • Manufacturing: 9.2%

  • Electricity, Gas, Water Supply & Utilities: 8.9%

• Services Sector: 9.7%

• Construction: 7.7%

• Trade, Hotels, Transport, Communication & Services: 8.5%

• Financial, Real Estate & Professional Services: 12.1%

• Public Administration, Defence & Other Services: 7.5

Based on the Reserve Bank of India (RBI) Bulletin published in October 2026 (specifically from the Monetary Policy Report and the Governor's Statement), here is the detailed breakdown of central government tax collection data:

Central Government Tax Collections (April–August 2026)

(₹ in thousand crore)

Tax Category	2025–26 Budget Estimates (BE) PDF	2026–27 Budget Estimates (BE) PDF	Apr–Aug 2025 (Actuals) PDF	Apr–Aug 2026 (Actuals) PDF	% of BE (Apr–Aug 2025) PDF	% of BE (Apr–Aug 2026) PDF	Y-o-Y Growth Rate (Apr–Aug 2026 vs. 2025) PDF
A. Direct Taxes	2,520	2,697	693	794	27.5%	29.4%	+14.6%
— 1. Corporation Tax	1,082	1,231	229	265	21.2%	21.5%	+15.4%
— 2. Income Tax	1,360	1,392	441	495	32.4%	35.6%	+12.3%
B. Indirect Taxes	1,750	1,707	651	638	37.2%	37.4%	-2.0%
— 1. GST (Centre)	1,183	1,025	454	439	42.8%	38.4%	-3.4%
— 2. Customs Duties	240	271	83	107	34.6%	39.3%	+28.2%
— 3. Union Excise Duties	317	389	112	87	22.3%	35.3%	-22.6%
C. Gross Tax Revenue (A + B)	4,270	4,404	1,344	1,432	32.5%	31.5%	+6.5%
D. Assignment to States	1,422	1,526	530	590	37.3%	38.7%	+11.4%
E. Net Tax Revenue (C – D)	2,837	2,867	810	838	29.2%	28.6%	+3.4%

Key Highlights & Context

• Direct Taxes Growth: Gross collection of direct taxes registered strong 14.6% y-o-y growth during April–August 2026 (compared to a 0.8% contraction during the same period in the previous year), supported by double-digit growth in both Corporation Tax (+15.4%) and Personal Income Tax (+12.3%).

• Indirect Taxes Decline: Centre’s indirect tax collections experienced a slight contraction of -2.0% y-o-y. This contraction was primarily driven by:

  • A decline in Central Goods and Services Tax (CGST) revenues due to tax rationalisations across key sectors.

  • A 22.6% drop in Union Excise Duty collections resulting from excise duty cuts on petrol and diesel.

  • These were partially offset by a sharp 28.2% surge in Customs Duties.

• Gross & Net Tax Receipts: Overall Gross Tax Revenue reached ₹1,432 thousand crore (+6.5% y-o-y). After accounting for assignments/devolution to states (₹590 thousand crore), Net Tax Revenue stood at ₹838 thousand crore.

• Overall GST Trend (Centre + States): While Centre-only GST receipts contracted slightly, aggregate gross GST collections across the Centre and States combined registered robust double-digit growth during the July–August period, reaching ₹204 thousand crore in September 2026.