RBI Bulletin – February 2026
The Reserve Bank of India released its February 2026 Bulletin containing the bi-monthly monetary policy statement (February 6, 2026), one speech, three articles, and current statistics.
The three featured articles cover the State of the Economy, an assessment of Union Budget 2026-27, and Corporate Investments.
The Bulletin noted that India's near-term economic outlook remains favourable and well-positioned to sustain high growth momentum, driven by consumption, investment, and productivity-enhancing reforms.
It highlighted that the India-EU free trade agreement and the interim India-US trade deal have improved investor sentiment, leading to a recovery in foreign portfolio investments and the Indian rupee.
Headline inflation remained subdued under the revised CPI series, and the RBI raised its GDP growth projection by 20 basis points each for Q1 and Q2 of FY 2026-27.
RBI Monetary Policy Framework
The RBI's Monetary Policy Committee (MPC) operates under the flexible inflation targeting (FIT) framework adopted in 2016, with a mandated CPI inflation target of 4% (with a tolerance band of +/-2%). In its February 2026 meeting, the MPC kept the repo rate unchanged at 5.25% after cumulative rate cuts of 125 basis points through 2025. The neutral stance was retained, signalling data-dependent future action.
Key Details
- Repo rate: 5.25%; Standing Deposit Facility (SDF): 5.00%; Marginal Standing Facility (MSF): 5.50%
- GDP growth for FY 2025-26 projected at 7.4% (revised upward from 7.3%)
- CPI inflation for FY 2025-26 projected at 2.1%
- The Bulletin noted that vegetable prices (particularly tomatoes, onions, and potatoes) remain the primary source of headline inflation volatility
- Inflation expectations are increasingly anchored, with reduced price shock propagation since 2021-22
The February Bulletin reinforces the RBI's assessment that India occupies a "goldilocks" zone of strong growth with contained inflation, justifying the pause in rate cuts to preserve macroeconomic stability.
Union Budget 2026-27: Fiscal Consolidation with Growth Push
The Union Budget 2026-27 targets a gross fiscal deficit of 4.3% of GDP, down from 4.4% in FY 2025-26, continuing the consolidation trajectory from the 9.2% pandemic peak in FY 2020-21. Capital expenditure has been raised to Rs 12.2 lakh crore (3.1% of GDP), with effective capital expenditure budgeted to increase to 4.4% of GDP from 3.9% in the revised estimates for FY 2025-26. The government aims for a debt-to-GDP ratio of 50+/-1% by FY 2030-31.
Key Details
- Gross tax revenue budgeted to increase by 8.0% in FY 2026-27
- Revenue expenditure contained at 10.5% of GDP (down from 10.8%)
- Effective capital expenditure at 4.4% of GDP is the highest-ever allocation
- Nominal GDP for FY27 projected to grow at 10.1%
- The RBI Bulletin states the Budget reaffirms fiscal consolidation without diluting long-term growth focus
The Bulletin's positive assessment of the Budget signals that the combination of fiscal consolidation and stepped-up capital expenditure is expected to crowd in private investment and improve productive capacity.
Foreign Portfolio Investment and Trade Agreements
Foreign Portfolio Investment (FPI) flows are a key indicator of global investor confidence in an economy. FPIs staged a comeback in February 2026 into both equity and debt segments following the signing of the India-EU FTA and the interim India-US trade deal. These agreements are expected to improve market access, strengthen exports, improve the current account balance, and attract higher investments.
Key Details
- The RBI raised GDP growth projections for Q1 and Q2 of FY 2026-27 by 20 basis points each, partly attributed to trade deal benefits
- Trade deals are expected to not only strengthen exports but also attract FDI and FPI inflows
- India's balance of payments position has improved with recovering portfolio flows and a stable rupee
- The Bulletin noted that industrial activity remained robust and the services sector sustained healthy expansion
The Bulletin's emphasis on trade agreements as growth catalysts reflects the RBI's view that India's recent bilateral deals with the EU and US will provide a structural boost to GDP growth beyond the near term.
- Repo rate: 5.25% (unchanged); cumulative 125 bps cuts in 2025
- GDP growth FY 2025-26: 7.4% (revised upward from 7.3%)
- CPI inflation FY 2025-26: 2.1%
- Fiscal deficit target FY27: 4.3% of GDP (down from 4.4% in FY26)
- Capital expenditure FY27: Rs 12.2 lakh crore (3.1% of GDP)
- Effective capital expenditure FY27: 4.4% of GDP (highest-ever)
- Gross tax revenue growth target FY27: 8.0%
- Revenue expenditure: 10.5% of GDP (down from 10.8%)
- GDP growth projections: Q1 FY27 at 6.9%, Q2 FY27 at 7.0% (each raised by 20 bps)