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Informist, Wednesday, Oct. 1, 2025

 

MUMBAI - Dharmakirti Joshi, chief economist, Crisil Ltd., said the following on the Reserve Bank of India's fourth bi-monthly monetary policy for 2025-26 (Apr-Mar) detailed on Wednesday:

 

Contrary to our expectation of another cut in the repo rate, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has preferred to stay put, even as inflation has declined more rapidly than anticipated.

The MPC has revised its inflation forecast downward by 50 basis points (bps) to 2.6%, while increasing the GDP forecast by 30 bps to 6.8%.

Mint Road perceives risks around its growth projections to be balanced, affording it the elbowroom to wait and watch, given incomplete transmission of the previous policy rate reductions and lingering global uncertainties. Apart from monitoring transmission, it is keeping an eye on the ongoing cash reserve ratio cuts. 

Several factors remain conductive for further monetary policy facilitation:

* India's gross domestic product growth is projected to slow in the latter half of this fiscal as the impact of higher US tariffs manifests, and a global economic slowdown becomes evident. This is despite the support to consumption from direct and indirect tax cuts. If the US continues with the higher tariff levels, India's exports will face challenges in the second half

* Inflation is expected to remain low this fiscal, with the Consumer Price Index-based gauge averaging 2.4% and the Wholesale Price Index-based print at 0.1% in the first five months of this fiscal. The MPC has brought down its inflation forecast for this fiscal to 2.6% and trimmed for the first quarter next fiscal

* China's excess capacity and low prices are contributing to disinflation in other economies, a trend likely to continue in the near term. Crude oil prices, too, are projected to remain soft

* The US Federal Reserve's decision in September to lower its funds rate by 25 bps, and the expectation of further such moves, lends the MPC greater flexibility to consider further reduction in the repo rate

Given the turbulent times, fiscal and monetary authorities need to keep eyes peeled on exports, particularly from sectors that are employment-intensive and dominated by MSMEs.  End

 

Compiled by Durva A. Shivalkar
Filed by Avishek Dutta

 

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