Archive · 16 Jan 2026
RBI Cuts Rates, Budget 2026 Focuses on Fiscal Deficit
The Reserve Bank of India (RBI) has been cutting interest rates to help the economy grow.
They started this in February 2025 and have cut rates a few times since then.
The repo rate, which is the rate at which banks borrow from the RBI, has gone down from 6.25% to 5.25%.
The RBI thinks the economy is doing well with good growth and low inflation, which they call a 'Goldilocks' period.
They might cut rates again in February 2026.
The Indian government is also preparing the Budget for the next fiscal year, which will be announced in February 2026.
The budget is expected to focus on reducing the fiscal deficit to 4.2% of GDP and prioritizing spending on infrastructure and social sectors.
These changes are meant to help businesses and people by making borrowing cheaper and supporting the economy.
RBI has cut the repo rate by 125 basis points in 2025, bringing it down from 6.25% to 5.25%.
The RBI is expected to cut the repo rate by another 25 basis points in February 2026, bringing it to 5.00%.
The RBI has also lowered the Cash Reserve Ratio (CRR) by 100 basis points to improve liquidity and support credit growth.
The Indian economy experienced a 'Goldilocks' period in the first half of FY26 with 8.0% GDP growth and 2.2% inflation.
The annual Budget for FY27 is scheduled to be presented on February 1, 2026, with a fiscal deficit target of 4.2% of GDP.
- Who
- Reserve Bank of India (RBI) and the Indian Government
- What
- RBI's rate cuts and the upcoming Budget 2026
- When
- February 2026
- Where
- India
- Why
- To support economic growth, manage inflation, and prioritize fiscal consolidation
- Repo Rate in February 2025
- 6.25%
- Repo Rate in December 2025
- 5.25%
- Expected Repo Rate in February 2026
- 5.00%
- Total Rate Cuts in 2025
- 125 basis points
- Cash Reserve Ratio (CRR) Reduction
- 100 basis points
- Liquidity Injection by December 2025
- Rs 2.5 lakh crore
- GDP Growth in H1 FY26
- 8.0%
- Inflation in H1 FY26
- 2.2%
- Fiscal Deficit Target for FY27
- 4.2% of GDP
- Debt to GDP Ratio for FY27
- 55.1%
- Expected Net Issuance of G-Secs for FY27
- Rs 11.6 trillion
- Expected Gross Issuance of G-Secs for FY27
- Rs 15.8 trillion
Sources
How RBI’s ‘Goldilocks’ Pivot Has Set the Stage for a High-Octane Budget 2026
Debt-GDP may dip to 55.1%, fiscal deficit to 4.2% in FY27
India’s fiscal deficit to be set at 4.2 pc of GDP for FY27: Morgan Stanley
3 reasons markets may be wrong on a US Fed rate cut in January FOMC meeting
Budget 2026: Focus to be on capex, job creation; FY27 fiscal deficit seen at 4.2%: Morgan Stanley
