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Informist, Friday, Jul. 25, 2025

 

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--RBI Malhotra: Never let our eyes off inflation 
--CONTEXT: RBI Governor Malhotra speaking at Modern BFSI Summit in Mumbai 
--RBI Malhotra:Price stability, banking regulation continue to be challenges 
--RBI Malhotra: MPC to look at data coming in 
--RBI Malhotra: MPC to look at 6-12 months outlook more than current data 
--RBI Malhotra:Neutral stance gives flexibility for rates to move either way 
--RBI Malhotra: Growth rate below our expectations 
--RBI Malhotra: Have to be forward-looking as monetary policy works with lag 
--RBI Malhotra: Have enough ammunition in monetary policy toolkit 
--RBI Malhotra: Neutral stance indicates bar for easing higher 
--RBI Malhotra on neutral stance: Let's look at quantum of cuts, not timing 
--RBI Malhotra: Data shows food prices more volatile than core, headline CPI 
--RBI Malhotra: Will provide right macro-econ conditions for growth

 

NEW DELHI – At 6.5%, India's economic growth is robust but remains below aspirations, Reserve Bank of India Governor Sanjay Malhotra said Friday. On the other hand, the central bank has won the battle against inflation even as the war to maintain price stability is a continuous one, Malhotra said at the Modern BFSI Summit organised by the Financial Express newspaper in Mumbai. 

 

India's GDP grew 6.5% in 2024-25 (Apr-Mar) and the central bank projects the same pace of growth for the current financial year. Retail inflation has been on a declining trend for a while now, falling to a 77-month low of 2.10% in June. 

 

It is in this macroeconomic scenario that the RBI's Monetary Policy Committee lowered interest rates, Malhotra said. The MPC has reduced the repo rate by 100 basis points so far in 2025, including a larger than expected reduction of 50 bps in June.

 

The MPC also unexpectedly changed the policy stance to neutral in June, having adopted the accommodative stance only at the previous meeting. The neutral stance allows the MPC to move in either direction or keep interest rates on hold, Malhotra said.

 

The neutral stance means the bar for further policy easing is higher compared to an accommodative stance, the governor said. "Rate cuts will depend on the outlook for growth and inflation, rather than the current numbers," he added. Malhotra said since monetary policy was forward-looking, the MPC would look at data relating to the outlook for six to 12 months, more than the current data.

 

The RBI currently projects CPI inflation to stay below 4% till Oct-Dec, before rising to 4.4% in the March quarter. Malhotra said inflation projections could be revised lower at the August MPC meeting, "given than inflation is coming in lower than our projections". Monetary policy will be guided by the revised numbers, if any, he added.

 

CPI inflation averaged 2.7% in the June quarter, 20 bps lower than the RBI's forecast of 2.9%. Economists expect retail inflation to stay near 2% in July as well. Malhotra said the central bank never takes its "eyes off inflation" as price stability remains the biggest challenge for the RBI, along with banking regulation. The governor said that historical data shows that food price inflation is more volatile compared with core and headline CPI.

 

Asked about the quick change in policy stance, Malhotra said that instead of the timing of the stance change, the quantum of interest rate cuts should be looked at. He added that the RBI had enough ammunition and tools in its monetary policy toolkit which it could use if the need arose. 

Malhotra said the central bank would continue to provide the right macroeconomic conditions for growth. The RBI will also provide certainty on liquidity, policies, monetary policy, and regulations. "They (government and businesses) should go about with the confidence that the RBI is there to support them in their endeavours and of course, the RBI will step in wherever they find some actor is not acting as per the rules of the game."  End

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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