The Reserve Bank of India (RBI) has kept its repurchase rate unchanged at 5.5 per cent.
The central bank has been watching risks from global trade changes and examining uncertainty over possible new US tariffs.
According to reports, the Monetary Policy Committee, made up of six members and led by RBI Governor Sanjay Malhotra, voted unanimously to maintain a ‘neutral’ stance on policy.
The United States has started charging a 25 per cent duty on all Indian goods entering the country from Thursday. It has also threatened to raise tariffs even more if India keeps buying oil from Russia. While Governor Malhotra didn’t directly mention the US tariffs, he said their effect on India’s economy is hard to judge.
“Prospects of external demand remain uncertain amidst ongoing tariff announcements and trade negotiations. The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook,” he was quoted as saying.
Because of these global issues, the RBI has revised its growth forecast down from 6.7 per cent to 6.5 per cent. Malhotra said this new number already takes some of the risks into account.
“Growth is robust and as per earlier projections, though below our aspirations. The uncertainties of tariffs are still evolving. Monetary policy transmission is continuing,” he told media outlets.
Still, Malhotra has noted that India’s domestic economy is doing well, thanks to its strong fundamentals.
“Opportunities are there for the taking, and we are making all efforts to create enabling conditions through a multi-pronged yet cohesive approach to policy making… Despite a challenging external environment, the Indian economy is navigating a steady growth path with price stability. Monetary policy has appropriately used the policy space created by the benign inflation outlook to support growth without compromising on the primary objective of price stability,” he said.
The RBI also lowered its inflation forecast for the year from 3.7 per cent to 3.1 per cent, but warned that inflation may go up toward the end of the year.
Governor Malhotra added that India needs strong policies across the board, not just in monetary policy, to succeed globally.
He concluded, “We, on our part, will continue to be agile and proactive in providing a facilitative monetary policy based on incoming data and the evolution of the growth-inflation dynamics. As always, we will have a clear, consistent and credible communication backed by actions necessary for the task at hand.”
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