Kathmandu— The Reserve Bank of India (RBI) is widely expected to maintain its benchmark repo rate at 5.25 per cent during its policy announcement on Wednesday, reflecting a 'neutral' stance amid favorable macroeconomic conditions. Analysts project that the RBI's Monetary Policy Committee (MPC) will retain this position due to easing inflation and resilient economic growth.

Easing Inflation Below Projections

Retail inflation has remained below the central bank’s projections, with average inflation for the first quarter of FY27 coming in at 3.9 per cent against the RBI's forecast of 4.2 per cent. Softer commodity prices have also provided support, with international crude oil prices trading in the range of USD 85-87 per barrel, significantly below the RBI’s June assumption of USD 95 per barrel.

Resilient Economic Growth

Economic growth has remained resilient. While the RBI projected GDP growth at 6.6 per cent for the current financial year, expectations have strengthened, with growth now seen closer to 7 per cent, reflecting sustained domestic demand and investment activity.

Strong Foreign Currency Inflows

The RBI's measures to attract foreign currency inflows have yielded strong results. Special relaxations under the FCNR(B) deposit and External Commercial Borrowing (ECB) framework have mobilised about USD 40.82 billion so far, surpassing the USD 34 billion raised over three months during a similar exercise undertaken in 2013. The current window remains open until September 30, leaving further scope for additional inflows.

Resilient Foreign Exchange Reserves

India's foreign exchange reserves have also remained resilient despite episodes of market volatility. Reserves stood at USD 682.32 billion at the end of May before declining to USD 676.23 billion by mid-July as the RBI intervened to manage rupee volatility amid geopolitical tensions and crude oil fluctuations. The reserves subsequently recovered to a record USD 682.35 billion by July 24, supported by strong inflows mobilised through the FCNR(B) and overseas borrowing initiatives.

(With inputs from ANI)

Originally published on abcnews.com.np.