Mumbai: There is an old economic proverb: the skill of a captain is judged not when the sea is calm, but when the winds begin to shift.
That wisdom echoed through the Reserve Bank of India's policy statement on Friday. Across the world, oil prices remain elevated, geopolitical tensions continue to unsettle trade routes, supply chains face renewed pressures and investors scan the horizon for signs of stability. At home, forecasters warn of a weaker monsoon and the possible emergence of El Niño. The waters around the global economy are not yet stormy, but they are no longer calm.
It is against this backdrop that the Reserve Bank of India chose prudence over haste.
Holding the repo rate unchanged at 5.25%, while raising its inflation forecast and lowering its growth projection, the central bank delivered a message that was cautious without being pessimistic and realistic without being alarmist. The policy acknowledged growing risks, yet reaffirmed confidence in the resilience of the Indian economy. RBI Governor Sanjay Malhotra indicated that the balance of risks has shifted since the last policy review.
Inflation is now projected at 5.1% for FY27, up from the earlier estimate of 4.6%, while GDP growth is forecast at 6.6% compared with 6.9% projected previously. The revisions reflect concerns over elevated crude prices, geopolitical uncertainties, supply-chain disruptions and weather-related risks. Yet the message from Mint Street was clear: the good days of the Indian economy are not over. The environment has become more demanding, but India enters this phase from a position of relative strength. Malhotra emphasised that the economy is better placed than during many previous episodes of global turbulence. Robust domestic demand, a healthy banking system, resilient services exports and substantial foreignexchange reserves continue to provide important buffers against external shocks.
Alongside the rate decision, the RBI announced a package of measures aimed at strengthening India's balance of payments and attracting overseas capital. All new 15-, 30- and 40-year government securities will be included under the Fully Accessible Route, while key investment restrictions related to short-term holdings, concentration limits and individual securities for foreign portfolio investors under the general route will be removed.
The central bank also extended concessional forex swap facilities for external commercial borrowings raised by public sector undertakings. In addition, banks mobilising fresh FCNR(B) deposits with maturities of three to five years will receive full hedging support until September 30, 2026. The RBI further proposed restoring the export proceeds realisation period to nine months, a move expected to support foreign-exchange inflows.
More importantly, to attract foreign capital and support the rupee, the government has exempted foreign investors from income tax on interest income and capital gains earned from investments in government securities, effective April 1, 2026.
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