GDP Strong, Rupee Weak: What RBI’s Decision Means for Your EMI and Budget

New Delhi: India’s economy is sending mixed signals. While the second quarter GDP growth of FY26 came in at a robust 8.2%, outperforming expectations, the Indian rupee has plunged to record lows, with foreign investors continuing to pull money out of domestic markets. All eyes are now on the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), which held its meeting on 3 December to decide whether to cut the repo rate, currently at 5.5%, or maintain it.

Strong GDP vs Low Inflation
The strong GDP growth, driven by improved rural demand and urban consumption, suggests that economic activity is healthy. Meanwhile, retail inflation fell sharply to 0.25% in October, largely due to declining food prices. This combination presents a dilemma for the RBI: traditionally, rate cuts are unlikely when GDP growth is strong, but low inflation creates room for easing monetary policy without risking macroeconomic stability.

Expert Opinions Split

• Mehul Pandya, MD & Group CEO of CareEdge Ratings, points out that strong GDP and historically low inflation pull policy in opposite directions.
• Mayur Modi, Co-founder & Co-CEO of MoneyBox Finance, argues that the record GDP growth gives the RBI more freedom to reduce interest rates. Falling prices allow the MPC to prioritize growth while maintaining macroeconomic stability.

What It Means for Your EMIs and Budget
If the RBI cuts the repo rate, loan EMIs—home, personal, and auto—could become cheaper, providing relief to households. Conversely, if rates remain unchanged, borrowers will continue paying current EMI levels, but the strong economic growth could help maintain employment and income levels.

Outlook
A report by Bank of Baroda suggests that the RBI is likely to maintain the repo rate at 5.5% with a neutral stance. Economic performance remains robust, and signals from both urban consumption and rural demand indicate that growth momentum may continue into the third quarter. Improvements in private investment further support optimism for sustained economic activity.