More Stories

Informist, Wednesday, Oct. 15, 2025

 

By Aaryan Khanna

 

NEW DELHI – The minutes of the Reserve Bank of India Monetary Policy Committee's Sept. 29-Oct. 1 meeting showed that the panel diverged on the timing and intent behind cutting the policy repo rate any further. All the six members acknowledged that the sharp fall in inflation had opened up space for further monetary policy easing. 

 

The MPC voted unanimously to hold the policy repo rate at 5.50%  earlier this month. Nearly all members found differing reasons to justify the action. RBI Governor Sanjay Malhotra said it was not an opportune time to cut rates as it would not have the desired impact on boosting growth. RBI Executive Director Indranil Bhattarcharyya agreed with the governor, said a rate reduction in October may hurt policy credibility over the medium-term as financial markets were not expecting a rate cut.

 

External member Nagesh Kumar said the MPC may want to wait and watch for the impact of prior policy actions and trade-related uncertainties to play out before taking action. The panel had cut the repo rate by 100 basis points between February and June.

 

"Depleting policy ammunition at this point does not seem warranted until there is more clarity on how the global policy environment will unfold henceforth," RBI Deputy Governor Poonam Gupta said in her minutes.

 

Kumar was the most vociferous advocate for monetary policy measures to dampen the hit of the recent US tariff and trade policy on India's GDP, jobs and micro-small and medium industries. Between the policy outcomes in August and October, the US imposed a 50% tariff on Indian imports, and raised the fee on H1-B visas to $100,000, among other measures that were seen having a disproportionate impact on India. Kumar termed this as a comprehensive assault on India by the Donald Trump administration.

 

On the growth front, the consensus was that September quarter growth is likely to hold up after the Apr-Jun GDP surprise of 7.8% growth on year. Malhotra acknowledged that the outlook for growth was softer despite the current reckoning, a point Deputy Governor Gupta had made in the post-policy press conference on Oct. 1. The RBI revised down its GDP growth forecasts for the December and March quarters by 10 and 20 basis points, respectively.

 

"The intent of policy, nevertheless, is to continue to facilitate growth-enabling conditions," RBI Governor Malhotra said, justifying his vote to hold the repo rate. "Some of the regulatory measures announced today will also be supportive of this objective." The governor was referring to the 21 regulatory measures he announced after the MPC meeting, largely easing regulations on banks and non-bank financial companies while allowing easier capital flow.

 

Most panel members pointed to the fall in the RBI's forecast for headline inflation to average 2.6% in 2025-26 (Apr-Jun) as the reason for the greater room to support growth. Kumar said that after the goods and services tax rejig, inflation may fall even below the RBI's latest forecast, which has been revised down by 110 bps from the June policy meeting. The central bank officials reiterated that the latest forecasts had accounted for the impact of the GST reforms on both growth and inflation.

 

"The prevailing inflation rate is too low - it is neither conducive for businesses nor for public finances," external member Ram Singh said. CPI inflation in September fell to an over-eight-year low of 1.54%. "Besides, the downward revisions to the growth forecast of H2:2025-26 (Oct-Mar), coming on the heels of a more benign inflationary outlook, make a case for an additional growth-supportive interest rate cut."

 

However, some central bank officials and even one external member were sanguine on the outlook beyond that. RBI's Bhattacharyya, attending his first MPC meeting, said the current ultra-low inflation levels were transitory and monetary policy must recognise the demand pressures emanating from past fiscal and monetary measures. All the members acknowledged the need to better gauge the impact of earlier policy easing.

 

"The cumulative effects of the multiple, mutually reinforcing, policy stimulus measures – fiscal, monetary, financial and banking, trade, investment, regulations, etc. – which have been progressively rolled out, need to be monitored," external member Saugata Bhattacharya said. "A moderation in the inflation rate is not a compelling reason, at this point, to cut the policy rate." He also pointed out 

 

NUANCE ON STANCE

 

Singh and Kumar highlighted that the case for cutting rates had strengthened since the August policy, and were in favour of changing the policy stance to 'accommodative' from 'neutral'. The other four panel members said they were in favour of maintaining the policy stance. The MPC does not vote on a stance. 

 

"A change in stance to accommodative increases the odds of a rate cut in this easing cycle," Ram Singh said. "Backed by conducive liquidity conditions and further improvement in transmission, it will add to the income and demand effects induced by the 100 bps rate cuts so far."

 

External member Bhattacharya said there was too much fluidity in the macro-financial environment to change stance, while RBI Governor Malhotra said the MPC should be more cautious and avoid giving definitive forward guidance, instead deciding on a per-policy basis. Gupta, the RBI executive director, said that neutral stance did not preclude a rate cut if required. Instead, she was of the view that it may not be possible to "confidently commit" to a new stance due to the heightened global uncertainty.  End

 

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.