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Informist, Wednesday, Apr. 23, 2025

 

NEW DELHI – Worries about India's growth outlook amid heightened global uncertainty, and increasing comfort with inflation dominated the Reserve Bank of India's Monetary Policy Committee's Apr. 7-9 policy meeting where it cut the repo rate by 25 basis points to 6.00%, minutes from the meeting released on Wednesday showed. Members said that growth requires more support at the current juncture and the projected inflation trajectory opens space for policy easing.

 

"...considerable progress achieved on the disinflation front has offered latitude to monetary policy to be growth supportive," RBI Executive Director Rajiv Ranjan said in his statement in the minutes. "On balance, while growth is still reasonable, it is lower than our aspirations and needs policy impetus amidst a challenging global environment," Ranjan said.

 

April was the second consecutive meeting when the MPC lowered interest rates by 25 bps as growth remained far from robust while inflation is seen staying closer to the RBI's medium-term target of 4%. The MPC also unanimously adopted the accommodative stance from neutral, indicating that going forward the rate-setting panel will only either keep interest rates on hold or lower them. 

 

RBI Governor Sanjay Malhotra said that growth is still moderate and "monetary policy needs to nurture domestic demand impulses to further increase the growth momentum." Saugata Bhattacharya, external member of the MPC, said that forecasted moderate inflation path opens up more space for "good news" policy easing. "Moreover, the present resilience of economic activity does not as yet necessitate additional "bad news" actions associated with prospects of a significant growth slowdown," Bhattacharya said in his statement.

 

The RBI at the April MPC meeting lowered its growth and inflation forecasts for 2025-26 (Apr-Mar) by 20 bps each to 6.5% and 4.0%, respectively. While economists broadly agree with the RBI's inflation outlook, some have termed the growth projection as optimistic and instead see it closer to 6.0%.

 

The International Monetary Fund Tuesday slashed India's GDP growth forecast for FY26 by 30 bps to 6.2% and for FY27 by 20 bps to 6.3%. On Wednesday, the World Bank lowered its growth forecast for India for the current financial year by 40 bps to 6.3%.

External member Nagesh Kumar said the MPC could target a more ambitious 50 bps cut to support growth through private consumption and investment.

 

A 50 bps cut, Kumar said, may be more effective than two cuts of 25 bps each. But, the MPC can ease interest rates cautiously in a phased manner, given the global uncertainty, Kumar said. Ranjan said that "all pervasive tariff is now a reality" which will have adverse implications for global trade and growth.

 

"With global rules of the game changing, India is bound to get affected through several channel," Ranjan said. "Even as India remains essentially domestic demand driven, the drag to growth may come from global front, through lower external sector contribution and high investment uncertainty."

 

External member Bhattacharya said that higher input costs due to tariff-related supply chain dislocations are likely to be transitory.

 

"Assessing the overall situation, we find that while inflation outlook remains benign, GDP growth could face a downward pressure," said M. Rajeshwar Rao, deputy governor, RBI. "The recent waves of global uncertainty demand decisive policy support to growth," said Rao.  End

 

Reported by Shubham Rana

Edited by Deepshikha Bhardwaj

 

 

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