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Informist, Wednesday, Aug. 5, 2026

 

MUMBAI - Following are the highlights of Reserve Bank of India Governor Sanjay Malhotra's statement Wednesday after the third bi-monthly meeting of the Monetary Policy Committee for 2026-27 (Apr-Mar):

 

KEY TAKEAWAYS

* MPC unanimously left repo rate unchanged at 5.25%

* MPC left repo rate unchanged at 5.25%

* MSF, Bank rates remain unchanged at 5.50%; SDF rate at 5.00%

* MPC decided to maintain 'neutral' policy stance

* West Asia war amplifying mkt volatility, depressing sentiment

* West Asia conflict continues to amplify market volatility

* Global growth expected to soften

* Trade uncertainty linger as US imposes tariffs

* Inflation forecast is higher for 2026 vis-a-vis 2025

* Crude oil prices, currencies volatile on West Asia conflict

* Reservoir levels bode well for growth

* Govt measures expected to mitigate hit from deficient rainfall

* Minutes of MPC Aug meet to be published on Aug 19

 

EXTERNAL SECTOR

* India CAD FY26 modest

* CAD remained modest FY26 despits global uncertainty

* India Apr-May current acct surplus on svcs exports

* Trade deficit widened Q1 on import of crude, electronic goods

* See upside risks to India CAD

* Merchandise trade deficit widened on crude oil, gold imports

* Moderation in global growth poses upside risks to India CAD

* Trade deals, healthy svcs export to mitigate CAD upside risk

* Gross FDI inflows remain buoyant

* Strong remittances to mitigate upside risks to CAD

* FPI has seen a turnaround in Jun-Jul, inflow of $7.1 bln

* FPI to India seen a turnaround Jun, Jul, driven by debt segment

* Capital flow measures will support inflows

* BoP seen in healthy surplus FY27

* IFX reserves continue to be adequate

* Import cover of over 10 months, external debt cover near 91%

* FX intervention to be derived from mkt behaviour

* To continue with policy of market-determined exchange rate

* Rupee should not be de-synced with econ fundamentals

* Net external demand seen strong on new trade agreements

* Net external demand to be strong on govt's trade pacts

* Renewed W Asia tensions pose downside risk to growth

* Allied activities may partially offset weak monsoon

 

INFLATION

* Revises FY27 CPI inflation forecast to 5.0% from 5.1?rlier

* Revises Jul-Sept CPI inflation forecast to 4.7% from 5.1?rlier

* Retains Oct-Dec CPI inflation forecast at 5.9%

* Revises Jan-Mar CPI inflation forecast to 5.5% from 5.4?rlier

* Forecasts Apr-Jun FY28 CPI inflation at 5.3%

* Revises FY27 CPI core inflation forecast to 4.3% from 4.7?rlier

* Higher CPI in June due to food, fuel inflation

* Core CPI ex precious metals 2.3-2.5% in May-Jun

* Spatial distribution of rainfall a risk for food inflation

* El Nino on rainfall distribution a major risk going fwd

* Generalised inflation remains modest

* Generalised inflation pressures modest as of now

* Risks to inflation forecasts are evenly balanced

* Risks to inflation are evenly balanced

* Core CPI ex precious metals to align with core CPI end-FY27

* MPC noted headline CPI above aim, as expected

* MPC noted limited passthrough of price pressures

* Inflation higher mainly on fuel, food prices

* MPC noted core CPI inflation remains benign

* Headline inflation expected to rise in near-term

* MPC noted CPI inflation to peak in Q3, then moderate

* Headline CPI may peak in Q3

* Little sign of generalised inflation

* Headline, core CPI may align by end FY27

* MPC noted CPI up on supply-side pressures

* MPC noted CPI rise not broad-based

* Core inflation moderate, expected to fall after peaking in Q3

* Need for greater clarity to emerge on inflation path

* MPC underscored to maintain close vigil on inflation

* MPC resolute in commitment to align inflation to target

* Supply-side pressures from West Asia war eased from Jun

* Re-escalation of West Asia war has amplified volatility

* Re-escalation of W Asia war renewed supply chain uncertainty

 

MACROECONOMY

* Indian econ beat expectations in Q1

* Revises FY27 GDP growth forecast to 6.7% from 6.6?rlier

* Revises Apr-Jun GDP growth forecast to 7.0% from 6.6?rlier

* Renewed tensions in West Asia pose downside risks to growth

* Revises Jul-Sept GDP growth forecast to 6.4% from 6.3?rlier

* Retains Oct-Dec GDP growth forecast at 6.5%

* Retains Jan-Mar GDP growth forecast at 6.8%

* Risks to growth forecasts are evenly divided

* Domestic econ activity continues to be resilient

* Growth continues to be supported by strong demand

* See sustained expansion in mfg, services activity

* MPC noted growth outlook hazy on monsoon uncertainty

* Growth resilient but may be lower in FY27

* MPC noted need for greater clarity before policy action

* High frequency data show domestic econ activity resilient Q1

* Consumption up, invest activity steady

* Invest activity remains steady on govt spending

* Early Q1 results indicate healthy performance of mfg cos

* Consumption up on pvt spending, govt capex strong

* Pvt consumption remained up on buoyant discretionary spending

* Mfg sector may face cost pressure

* Diversification of supply chains to help mfg sector

* Services sector may remain bouyant on strong demand

* Steady employment conditions should aid urban sector growth

 

BANKING

* Govt spend, RBI steps to aid liquidity in near-term

* Short-term money mkt rates such as CPs fell in Jul

* Measures to attract inflows to aid banking liquidity near term

* G-sec yields bouyed by measures by govt, RBI in June

* Transmission in credit mkt moderated slightly in May-Jun

* Credit growth robust, broad-based across sectors

* Credit growth remains robust, broad-based across sectors

* To use 2-way ops to ensure sufficient liquidity

* Will ensure sufficient liquidity in banking system

* To align weighted avg call rate to policy repo rate

* Aim to align weighted avg call rate to policy repo rate

* Some moderation in banks' NIM year-on-year

* System level NBFC parameters healthy

* Banks' profitability continues to remain healthy

* Not targetting level on rupee; to curb undue volatility

* Will issue draft guidelines for licensing urban co-op banks

* To issue draft direction on credit oversight on rural banks

* To harmonise norms on regulated cos interest rate on loans

* Propose to harmonise framwork of interest rates on loans

* To harmonise norms on loan rates of all regulated cos

* Strong macroecon fundamentals helping navigate global shock

* To take steps to fortify econ from global shocks

* To take steps to stability prices, currency, econ

End

 

 

US$1 = INR 95.09

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Vinod Bhovad

Edited by Akul Nishant Akhoury

 

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