In order to allow the 100-bps rate cut to pass through and to also keep more of options in their arsenal, RBI opted to hold rates at 5.5%. As a result, the SDF rate, the MSF rate and even bank rate stayed at their respective levels. Even the stance of the monetary policy was kept at neutral. The RBI clearly wants to ensure that if the tariffs and the visa fees hit GDP growth, then the government has the monetary and fiscal tools available to give a boost to growth. That would not be possible if another rate cut was done, being just 35 bps from pre-COVID rates.  

The real story was in the way the RBI tweaked its inflation estimates for F26. It reduced its inflation estimates by another 50 bps from 3.1% to 2.6%. Since the February 2025 policy statement, the RBI has reduced its inflation estimate for FY26 by a full 220 bps from 4.8% to 2.6%, which is extremely aggressive. At 2.6%, the average expected inflation is a full 140 bps below the median inflation that the RBI is targeting. It clearly shows the confidence of the RBI and the center that the tariffs and the visa fees would have just a limited impact on inflation. 

While inflation was a bold statement, the much bigger story was in the way the RBI tweaked its growth estimates for FY26. It raised its early estimate for FY26 GDP growth by 30 bps from 6.5% to 6.8%. This was obviously led by the fact that the real GDP growth in the first quarter of FY26 was very robust at 7.8%. But it also shows some other sub-stories. The RBI and the center have shown clear confidence that the tariffs and visa fees will have limited impact on growth. The RBI is betting that the Kharif output will offer a big boost to GDP, even as service sector continues to lead. Above all, low inflation is likely to keep the real GDP growth rate at persistently high levels. 

If one were to combine the rate action with the inflation cut and the growth hike, it clearly gives one message. The global crisis, if triggered by the US, will be ably managed by India internally. This shows a strong level of confidence in the domestic market, which has anyways been the biggest driver of growth for India in the past. Unlike most of South East Asia, India never relied too  heavily on exports to drive growth. While the export engine will continue to play a role, the RBI policy makes a bold statement that India cannot allow other countries to dictate the economic fortunes of India. Just for that very sentiment, this RBI policy is worth its weight in pure gold!