The Reserve Bank of India (RBI) is staying cautious on interest rate changes, with Governor Sanjay Malhotra warning of persistent global uncertainties—particularly around tariffs—that could disrupt economic momentum.
In the Monetary Policy Committee (MPC) meeting held from August 4 to 6, the RBI decided to keep the repo rate unchanged at 5.5 per cent. Minutes from the meeting, released Wednesday, show unanimous support from all six MPC members, including the Governor, for a status quo on rates.
Malhotra noted that while India’s economic fundamentals remain strong, the central bank must continue monitoring external risks. “The uncertainty over tariffs is still evolving,” he said, hinting at potential implications from global trade tensions, including those stemming from renewed tariff threats by former US President Donald Trump.
Despite these concerns, Malhotra expressed confidence in India’s medium-term outlook, citing the country’s inherent strengths, robust macroeconomic buffers, and supportive policy environment. He added that the coordinated tools at the RBI’s disposal are helping transmit monetary easing effectively into the financial system.
The Governor also pointed to expected improvement in urban demand, especially during the upcoming festive season, even as global demand and trade headwinds remain a drag on growth.
External member Ram Singh highlighted a series of positives for India’s growth trajectory, including strong PMI data, healthy private capital inflows, a good monsoon, rising capacity utilisation, and festive-led consumption. However, he also warned of “stress signals” in some sectors that could limit how far the economy can outperform.
The RBI kept its GDP growth forecast for FY26 steady at 6.5 per cent, reflecting confidence in the domestic economy’s resilience. Meanwhile, the central bank revised its inflation forecast downward to 3.1 per cent, from an earlier projection of 3.7 per cent—thanks largely to softer food prices.
External member Nagesh Kumar summed up the mood of the committee, saying that while there is room to boost private demand and investment, the MPC will likely “wait and watch” how current measures play out before deciding any moves in the October policy meeting.
