06 AUG 2025 | New Delhi
The Reserve Bank of India (RBI) has decided to keep the key policy repo rate unchanged at 5.5%, maintaining a neutral stance amid global uncertainties and evolving domestic conditions. The announcement came at the conclusion of the three-day Monetary Policy Committee (MPC) meeting held from August 4 to 6.
This marks the fourth policy address by RBI Governor Sanjay Malhotra since taking office, during which he outlined the central bank’s assessment of India’s inflation outlook, GDP growth forecast, and the rising risks posed by global trade disruptions—particularly from tariff-related developments in the United States.
RBI’s Monetary Policy Highlights:
- Repo rate: Held steady at 5.5%
- Standing Deposit Facility (SDF): 5.25%
- Marginal Standing Facility (MSF) & Bank Rate: 5.75%
- Policy stance: Neutral
- Next MPC meeting: September 29 – October 1, 2025
Trade Tensions & US Tariffs Raise Concerns
Governor Malhotra emphasized growing concerns over external risks due to new tariff announcements and trade negotiations by major economies, particularly the United States. He noted these could cast a shadow on India’s growth trajectory.
“Prospects of external demand remain uncertain amidst ongoing tariff announcements and trade negotiations,” Malhotra said. “Prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook.”
Despite India’s relatively strong domestic fundamentals, the Governor cautioned that external shocks may hamper momentum, especially in export-driven sectors.
Growth Projections Unchanged
RBI has retained its GDP growth forecast at 6.5% for FY 2025-26, with quarterly breakdowns as follows:
- Q1: 6.5%
- Q2: 6.7%
- Q3: 6.6%
- Q4: 6.3%
For Q1 FY 2026–27, the projected growth is 6.6%.
Malhotra said that above-normal monsoon, low inflation, and strong capital expenditure from the government are key tailwinds. Sectors like construction and trade are expected to drive services growth in the near future.
Inflation in Control, But Food Prices Volatile
The Governor acknowledged that headline inflation has declined, allowing the RBI to hold off on additional rate cuts. However, he flagged volatility in food prices, particularly vegetables, as an area of concern.
“Headline inflation is much lower than projected earlier… Core inflation has remained steady around the 4% mark. However, food price volatility remains a risk,” he said.
Earlier this year, the RBI had slashed rates by 100 basis points since February 2025 to support economic growth. The impact of those rate cuts is still unfolding, Malhotra added.
Global Economic Uncertainty Continues
Governor Malhotra also addressed the broader global landscape, noting that central banks worldwide are navigating low growth, sticky inflation, and rising public debt.
He noted that India remains well-positioned in the evolving global order, backed by strong fundamentals, political stability, and robust macroeconomic buffers.
“As the dust settles in the new global order, policymakers will need to navigate a world of modest growth and elevated debt levels,” he remarked.
RBI’s decision to pause on rate changes signals a wait-and-watch approach, allowing previous rate cuts to work through the economy while keeping an eye on external risks like US tariffs and volatile global markets.
