RBI MPC meeting: Reserve Bank of India (RBI) Governor Sanjay Malhotra Announced that Monetary policy committee (MPC) unanimously decided to cut the major policy repo rate by 25 basis points. He also said that GDP Development Outlook FY 2025-26 has been cut slightly from 6.7% to 6.5%. Approach to CPI inflation The current financial year appears to be benign at 4%.
In addition, MPC also decided to change the stance in adjustment from neutral. RBI Governor Sanjay Malhotra explained that in the context of India, a ‘adjustment’ policy means that MPC will either maintain status quo or cut the repo rate in future monetary policy meetings.
The Donald Trump administration has announced a 26% mutual tariff on Indian goods, and while other major economies have been hit with high rates, a business war means a large global economic recession and even recession. It is against this background that the monetary policy of RBI assumes importance.
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So why did MPC led by RBI governor unanimously decided to cut the repo rate? Justification for policy is at risk for India’s GDP growth.
- The MPC stated that inflation is currently below the target, supported by a sharp fall in food inflation. In addition, there is a decisive improvement in the approach to inflation.
- On the other hand, interrupted by a challenging global environment, development is still on a recovery path after a spectacular performance in the first half of 2024–25.
RBI said in its statement, “While the basic estimates of risk development are equally balanced, uncertainty remains high in the wake of recent bounce in global instability. Under such challenging global economic conditions, benign inflation and liberal development demands that MPC continues to support development.”
The RBI governor warned that the global economic approach is changing rapidly. He said that recent trade tariff measures have increased uncertainties, which, while presenting new headwinds for global development and inflation, gives clouds to economic approach in areas.
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He said the merchandise exports would be weighed by the developed global economic scenario which seems uncertain at the current point, while the export of services is expected to maintain flexibility.
“Domestic growth-specific projection seems to be helpful for development of monetary policy, while being attentive on inflation fronts. We are targeting a non-influential growth that is targeted for a better demand and supply response and constantly macroeconomic equilibrium.
