What is the common examiner trap about Economy in UPSC exams?

They may ask which forecast was revised 'upwards' or 'downwards'—GDP was revised down, CPI was revised up. They may also confuse the actions of the MPC (sets rates) with the RBI (manages forex and liquidity).

What should UPSC aspirants remember about Economy for Prelims?

1. Target this Data: FY2027 CPI inflation projection raised to 5.1% from 4.6%. 2. Target this Nodal Body: Monetary Policy Committee (MPC) of the RBI. 3. Target this Policy Tool: Expansion of the Fully Accessible Route (FAR) for Government Securities.

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News 30 of 33

RBI MPC Holds Repo Rate, Raises FY27 CPI Forecast to 5.1%, Announces Measures to Attract FPI in G-Secs

Q: Which committee is responsible for setting the policy repo rate in India?

Monetary Policy Committee (MPC), The Monetary Policy Committee (MPC) of the Reserve Bank of India is the statutory body mandated to determine the policy repo rate to achieve the inflation target. The article discusses the decisions of the MPC's bi-monthly meeting.

Q: Consider the following statements regarding the recent RBI Monetary Policy: 1. The MPC raised its CPI inflation projection for FY2027 by 50 basis points. 2. The MPC increased its real GDP growth projection for FY2027. 3. The committee cited upside risks to inflation from the sub-par monsoon and global supply-chain risks. Which of the statements given above is/are correct?

Both 1 and 3, Statement 1 is correct: The MPC raised the CPI inflation projection for FY2027 to 5.1% from 4.6%, a 50 bps hike. Statement 2 is incorrect: The MPC pared (cut) the real GDP growth projection for FY2027 by 30 bps to 6.6%. Statement 3 is correct: The article explicitly states that inflation risks remain tilted to the upside owing to sub-par monsoon and global supply-chain risks.

Q: According to the article, what is the Current Account Deficit (CAD) projected for FY2027 by ICRA?

2.0% of GDP, The article states: 'We project it to more than double to around 2 per cent of GDP in FY2027 from the 0.9 per cent expected in FY2026.' The other options are distractors: 0.9% is the expected CAD for FY2026.

Q: What was a primary objective of the RBI's announcements alongside the MPC's policy decision, as per the article?

To attract foreign capital inflows, especially into government securities, The article clarifies that the RBI governor made announcements 'to attract capital flows' and that these were 'aimed at incentivising more foreign capital inflows, especially in government securities (G-secs).' This was done to address currency weakness and support the balance of payments, not to change the policy rate directly.

EconomyCORE

Target:UPSC GS-IIIMPSCBankingSSC GATeachingPrelims HighMains MediumStatic GK Link

05 Jun 2026

~2 min

Source: Indian Express

Key Data:FY27 GDP growth 6.6%FY27 CPI inflation 5.1%MPC target range 2-6%FY27 CAD ~2% of GDPAvg crude price $95/barrel

Bodies:RBIMonetary Policy Committee (MPC)ICRA

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~2 min · Quick mode

What This Article Covers

1.The Monetary Policy Committee unanimously kept policy rates unchanged, maintaining a hawkish stance due to risks from West Asia conflict, El Niño, and sub-par monsoon.

2.The MPC cut FY2027 GDP growth projection to 6.6% but raised CPI inflation forecast to 5.1%, with upside risks from food and fuel price pressures.

3.The RBI announced coordinated measures to attract foreign capital, including expanding the Fully Accessible Route for G-Secs and proposing higher investment limits for NRIs/OCIs to stem capital outflows and support the balance of payments.

The Big Picture

Prelims · HighMains · Medium

The RBI's Monetary Policy Committee maintained status quo on rates, highlighting upside risks to inflation and downside risks to growth. Key actions include raising CPI forecasts for FY2027 and announcing measures to attract foreign capital into government securities to support the rupee and finance a widening current account deficit.

Exam Lens

Quick Exam Facts From News

FY27 GDP Forecast6.6% (cut from 6.9%)

FY27 CPI Forecast5.1% (raised from 4.6%)

MPC Target Range2-6%

FY27 CAD Projection~2% of GDP

Avg Crude Price Assumption$95 per barrel

1-Minute Revision

›FY27 GDP Forecast: 6.6% (cut from 6.9%)
›FY27 CPI Forecast: 5.1% (raised from 4.6%)
›Target this Data: FY2027 CPI inflation projection raised to 5.1% from 4.6%.
›Target this Nodal Body: Monetary Policy Committee (MPC) of the RBI.
›Target this Policy Tool: Expansion of the Fully Accessible Route (FAR) for Government Securities.

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News Snapshot

⚖️

Status Quo on Rates

The RBI's MPC unanimously kept the repo rate unchanged, maintaining a hawkish stance amid global and climatic uncertainties.

📈

Inflation Outlook Worsens

The MPC raised its CPI inflation projection for FY2027 by 50 bps to 5.1%, citing upside risks from food prices and supply chains.

🌐

Capital Flow Measures

The RBI announced measures like expanding the Fully Accessible Route for G-Secs to attract foreign capital and support the rupee.

Detailed Analysis & Strategic Depth

Context / Background

The policy review occurred amid a triad of uncertainties: the West Asia conflict elevating energy prices and supply risks, potential El Niño development, and a forecast of sub-par monsoon for 2026. These factors collectively created a stagflationary risk, complicating the MPC's inflation-growth trade-off.

Core Analysis & Implications

The MPC's decision reflects a 'wait and watch' approach. While holding rates, it simultaneously raised inflation forecasts and cut growth projections, signaling heightened caution. The real policy rate has compressed due to higher inflation expectations, but premature tightening was avoided as inflation remains within the target band. The separate RBI measures to attract FPI investments aim to finance a potentially doubling Current Account Deficit (~2% of GDP) and alleviate pressure on the rupee (USD/INR).

Future Outlook / Way Forward

The next policy move is likely a rate hike, with October and December 2026 meetings being 'live' for action, pending clarity on monsoon impact and inflation generalization. The success of capital attraction measures (FAR expansion, FPI limit removal, concessional forex swaps) will be crucial for bond yields, potential inclusion in global indices, and overall BoP stability.

Key Facts at a Glance

FY27 GDP Forecast6.6% (cut from 6.9%)

FY27 CPI Forecast5.1% (raised from 4.6%)

MPC Target Range2-6%

FY27 CAD Projection~2% of GDP

Avg Crude Price Assumption$95 per barrel

You've read the full analysis. Now test your understanding.

Practice exam-style questions based on this article.

Q1Static LinkageEasyUPSC, SSC, Banking, State PSC

Which committee is responsible for setting the policy repo rate in India?

Q2Statement-basedHardUPSC, Banking

Consider the following statements regarding the recent RBI Monetary Policy:

1. The MPC raised its CPI inflation projection for FY2027 by 50 basis points.

2. The MPC increased its real GDP growth projection for FY2027.

3. The committee cited upside risks to inflation from the sub-par monsoon and global supply-chain risks.

Which of the statements given above is/are correct?

Q3Data-centricMediumUPSC, Banking, SSC

According to the article, what is the Current Account Deficit (CAD) projected for FY2027 by ICRA?

Q4Application/ImpactMediumUPSC, Banking, SSC

What was a primary objective of the RBI's announcements alongside the MPC's policy decision, as per the article?

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RBI MPC Holds Repo Rate, Raises FY27 CPI Forecast to 5.1%, Announces Measures to Attract FPI in G-Secs

Exam Lens

Quick Exam Facts From News

1-Minute Revision

News Snapshot

Status Quo on Rates

Inflation Outlook Worsens

Capital Flow Measures

Detailed Analysis & Strategic Depth

Context / Background

Core Analysis & Implications

Future Outlook / Way Forward

Prelims Flashpoints

Key Facts at a Glance