RBI Governor Sanjay Malhotra reiterated a neutral policy stance with GDP growth projected at 6.5%
India’s Monetary Policy Committee (MPC) highlighted global trade tensions and tariff risks as key challenges to growth, but maintained confidence in the economy’s resilience and a low inflation outlook, according to minutes of the meeting in August.
On August 6, RBI held key lending rates steady, with repo rates at 5.50%, after three rate reductions in the previous policy meetings, tallying up to 100 basis points. Policy stance has been maintained at ‘neutral’.
RBI Governor Sanjay Malhotra said that the committee believes there is “very little policy room” remaining to boost growth, while emphasizing India’s promising outlook amidst global changes.
According to the minutes, Sanjay Malhotra noted that GDP growth, projected at 6.5%, reflects resilience but remains below potential. He warned that tariffs and geopolitical tensions are weighing on external demand.
Inflation Outlook
Malhotra added that while food inflation has eased more than expected, tariff-related risks remain fluid, making a neutral policy stance practical.
Deputy Governor Poonam Gupta cautioned that the moderation was not broad-based, with core inflation likely to stay above 4%. MPC member Ram Singh echoed this, describing CPI outlook as “benign” but flagging uncertainty in both growth and prices.
External members stressed the importance of balancing risks. Nagesh Kumar argued that the benign inflation outlook provides space to support investments and demand, but policy action should wait until uncertainties ease. Saugata Bhattacharya emphasized the need for monetary policy to manage trade-offs, particularly between loan and deposit rates.
The central bank continues to target 4% inflation within its 2 – 6% band, with GDP data due August 29.
Tariff Challenges
India faces tariffs of up to 50% on exports to the U.S. starting August 27, following President Donald Trump’s additional 25% levy earlier this month over India’s continued imports of Russian oil.
According to reports, India’s oil refiners have resumed buying Russian oil after pausing deliveries earlier this month.
India also posted its annual retail inflation data earlier, which slowed to 1.55% in July from 2.1% in June, the lowest in eight years. It was led by a steep drop in food prices. Food inflation came in at -1.76%, lower than -1.01% in June, its lowest in six years.
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