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Informist, Wednesday, Aug. 6, 2025

 

MUMBAI – Following are the highlights of Reserve Bank of India Governor Sanjay Malhotra's statement on Wednesday after the third bi-monthly meeting of the Monetary Policy Committee for 2025-26 (Apr-Mar):

 

KEY TAKEAWAYS

* MPC left repo rate unchanged at 5.50%
* MPC voted 6-0 to leave repo rate unchanged at 5.50%
* MSF, Bank rates remain unchanged at 5.75%; SDF rate at 5.25%
* Policy stance remains 'neutral'

* MPC voted unanimously to keep 'neutral' policy stance

* All MPC members decided to continue with neutral stance
* Next MPC meeting to be held on Sept 29-Oct 1
* Minutes of Aug MPC meeting to be released on Aug 20
 

MACROECONOMY

* Favourable setting, supportive RBI, govt augur well for econ
* Geopolitical uncertainty somewhat abated
* India econ holds bright prospects in medium-term as well

* Monsoon progressing well
* Uncertainty of tariff still evolving
* Uncertainties call for holding repo rate unchanged

* Outlook, uncertainties suggest holding rate is better

* Impact of 100 bps rate cut since Feb still unfolding
* To maintain close vigil on incoming data
* Some high-frequency data showed mixed signals Apr-May

* Some data showed mixed signals in May-Jun

* Steady monsoon helping sowing activity
* Steady southwest monsoon supporting kharif sowing
* Construction activity exhibits resilience
 

INFLATION

* FY26 inflation outlook more benign than June

* Cuts FY26 CPI inflation forecast to 3.1% from 3.7?rlier

* Cuts Jul-Sept CPI inflation forecast to 2.1% from 3.4?rlier
* Cuts Oct-Dec CPI inflation forecast to 3.1% from 3.9?rlier
* Retains Jan-Mar CPI inflation forecast at 4.4%
* Projects Apr-Jun FY27 CPI inflation at 4.9%
* Core CPI inflation rise in Jun partly driven by gold prices
* CPI inflation is likely to edge up above 4% in Q4

* Inflation expected to go up from Q4 FY26

* Unfavourable base effect, demand-side factors to push up CPI

* Core inflation likely to remain above 4% this year
* Risks to inflation forecasts are evenly balanced
* Core inflation seen moderately above 4% for FY26
* Core inflation steady around 4% as anticipated
* Inflation lower than before, mainly due to food prices
 

GROWTH

* Retains FY26 GDP growth forecast at 6.5%
* Retains Apr-Jun GDP growth forecast at 6.5%

* Retains Jul-Sept GDP growth forecast at 6.7%
* Retains Oct-Dec GDP growth forecast at 6.6%

* Retains Jan-Mar GDP growth forecast at 6.3%

* Projects Apr-Jun FY27 GDP growth at 6.6%

* Domestic growth holding up, in line with assessment

* Growth in industrial sector subdued, uneven
* Svcs sector expected to remain buoyant in coming mos

* Taken decisive, forward looking measures to support growth
* Headwinds from global uncertainty pose risk to growth view

* Headwinds from geopolitical tensions pose risk to growth view

* Risks to growth forecasts are evenly balanced

* Despite challenges, econ on steady growth path
 

EXTERNAL SECTOR

* CAD expected to be sustainable FY26
* India's share in world's services trade has risen
* Gross FDI remained strong Apr-May, net FDI moderated
* Net FPI outflows $0.8 bln Apr-Jul 31
* Saw net FPI outflows majorly on debt outflows
* Net inflows from ECBs higher over last year
* FX reserves cover 11 mos on merchandise imports
* India's FX reserves stood at $688.9 bln as on Aug 1
* India's share in world's svcs exports growth to 4.3% in 2024
* Merchandise trade deficit widened in Apr-Jun

 

FINANCIAL SECTOR

* System liquidity in surplus of INR 3 tln/day since Jun MPC
* CRR cut from Sept to further support liquidity conditions
* Comfortable liquidity has reinforced rate cut transmission
* Rate cut transmission reinforced in bond, credit mkts
* Will continue to be nimble, flexible in liquidity mgmt
* Transmission to lending rates broad based across all sectors
* Will maintain sufficient liquidity in banking system
* Weighted average lending rate on loans down 39 bps
* To ensure system liquidity enough to meet productive econ needs
* Internal working group on liquidity mgmt framework gave report
* Will publish LAF review panel report soon
* To upload liquidity mgmt framework working group report on website
* Working group mooted continuing weighted avg call rate as aim
* Working group suggested to continue with VRR, VRRR auctions
* System-level parameters of NBFCs sound
* Rate transmission to money markets faster
* Credit to econ rose to INR 34.8 trln FY25, up INR 0.9 tln YoY
* Transmission faster, cos turned more to markets for funds
* To expand functionality in RBI Retail Direct
* To standardise norms for settlement of claims in bank accts
* To allow investors to invest in T-bills through SIP
 

MISCELLANEOUS

* Monetary policy to be based on incoming data
* Monetary policy to be based on growth-inflation dynamics

* MPC has appropriately used policy space to support growth

* Will have clear, consistent, credible communication

* Will be agile, proactive in giving facilitative policy

End

 

US$1 = INR 87.78

 

Compiled by Vinod Bhovad

Filed by Vandana Hingorani

 

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