Highlights of Monetary Policy Statements by RBI Governor Sanjay Malhotra

 Rate Action, Key points

• All MPC members voted to retain repo rate at 5.25%

• MPC decided to continue neutral stance

• MPC noted headline inflation has edged up

• Higher inflation mostly due to fuel, food

• West Asia conflict continues to challenge global economy

• Trade uncertainty lingers as US imposed fresh tariffs

• The global economic environment has become increasingly unstable

• Crude oil prices, currencies, financial markets remain volatile

Global cues

• West Asia conflict continues to challenge global economy

• Trade uncertainty lingers amid US tariff measures

• The global economic environment has become increasingly unstable

• Moderation in global trade growth, energy prices, trade policy uncertainties pose upside risk  to CAD

• Global economic conditions remain hostage to West Asia conflict

• Stand ready to accelerate measures to withstand external shocks 

Inflation

• Core inflation continues to be benign

• Headline inflation is expected to rise further and peak in Oct-Dec

• Headline inflation seen rising, peaking in near term on food and fuel prices

• MPC noted inflation is not getting broad-based

• Need greater clarity on inflation

• Inflation outlook remains hazy amid southwest monsoon, El Niño and global trade uncertainty

• Core inflation, including precious metals, remained lower at 2.3%-2.5% during the period

• RBI revises 2026-27 CPI inflation estimate to 5.0% from 5.1% earlier

• Risks of second round impact of food,  fuel inflation persist.

• RBI revises January-March CPI inflation estimate to 5.5% from 5.4% earlier

• RBI revises 2026-27 core CPI inflation forecast to 4.3% from 4.7% earlier

• RBI revises July-September CPI inflation forecast to 4.7% from 5.1% earlier

• RBI retains October-December CPI inflation forecast at 5.9%

• Q1 2028-29 CPI inflation projected at 5.3%; risks evenly balanced

Growth

• Growth continues to be supported by domestic demand

• Services and exports keep growth steady

• Outlook on growth hazy

• Amidst persistent global uncertainty, domestic economic activity has exhibited resilience

• Supply side pressure has eased slightly

• Investment activity remains steady on the back of robust government spending

• Indian econ performed better than expected in Q1

• Government measures, normalisation of key input supplies eased supply-side pressures

• Prospects for agriculture clouded by deficient and uneven monsoons

• RBI revises 2027-28 GDP growth estimate to 6.7% from 6.6% earlier

• RBI revises April-June GDP growth estimate to 7.0% from 6.6% earlier

• RBI revises July-September GDP growth estimate to 6.2% from 6.3% earlier

• RBI revises October-December GDP growth estimate to 6.8% from 6.5% earlier

• Services sector expected to remain buoyant, supported by strong domestic demand

• El Nino a major risk

 Banking system

• Credit growth continues to remain robust

• Transmission in the credit market moderated

• Will proactively ensure sufficient liquidity in banking system

• Saw some hardening of deposit and lending rates in May and June

• Credit growth remains robust and broad-based across sectors

• RBI to proactively ensure sufficient system liquidity through two-way operations

India Economy

• Current account posted record $2.8 billion surplus in Apr-May

• Record Apr-May current account surplus driven by services exports and strong remittance inflows

• FPI to India has seen a turnaround in June and July

• Balance of payments is expected to register a healthy surplus

• Balance of payments is expected to register a healthy surplus

• FX reserves remain adequate, providing import cover of around 10 months

• FX reserves cover nearly 91% of India's external debt

• To curb excessive volatility in FX market

• Curbing excessive volatility, checking speculative behaviour in FX market

• Issuing draft guidelines for resuming licensing of urban cooperative banks

• RBI to issue draft guidelines on licensing of urban cooperative banks

• To harmonise regulatory framework for lending rates for all regulated entities