RBI speak: What the central bank said on growth, inflation, and tariff

The Reserve Bank of India (RBI) governor Sanjay Malhotra addressed the media after the end of the monetary policy committee (MPC) meeting on Wednesday, discussing key issues such as inflation, growth, tariff, and credit growth. The six-member MPC voted unanimously to keep the repo rate unchanged at 5.5% and maintain the policy stance at ‘neutral’, amid tariff uncertainties. Mint takes a look at the key issues discussed by Malhotra and his deputies and the context behind these issues.

On inflation

The MPC revised its FY26 consumer price inflation projection downward from 3.7% to 3.1%. However, it said it expected headline inflation to rise above 4% in Q4 FY26 and beyond. Malhotra said that the MPC will keep a close watch on incoming data, and evolving macroeconomic conditions to chart out an appropriate policy path. Deputy governor Poonam Gupta said that about half of India’s inflation basket consists of food, which is not impacted directly by global developments such as tariff and trade uncertainties. She said that a significant part of the inflation basket comprises non-tradables, which don’t get impacted by global developments. So, first-order direct impact of these uncertainties on India’s inflation is very, very limited, she added.

On growth

The MPC has retained its FY26 GDP growth forecast at 6.5%, pegging Q1 FY27 growth at 6.6%. Malhotra said that some of the global uncertainties have already been factored in the revised growth forecast. “However, there is still a lot of uncertainty and it is difficult to predict what impact will be.” he said, adding that the MPC will continue to assess incoming data before making any changes. “As of now, we do not have sufficient data to revise our GDP forecast,” Malhotra said. He also said that the central bank aspires to growth rates higher than 6.5%. Malhotra also emphasized that the Indian economy was doing quite well, and contributing more to global growth than the US, days after Donald Trump said the Indian economy was “dead”.  

On tariff

On the impact of US tariffs on the Indian economy, Malhotra said that RBI does not see a major impact unless there is a retaliatory tariff. Malhotra added that there is unlikely to be any major impact of tariffs on inflation, as the government will take appropriate fiscal measures in case of any shocks. US president Donald Trump has threatened India of higher tariffs for buying Russian oil, days after he announced 25% tariffs on Indian goods starting 7 August, and an unspecified penalty for ties to Russia.

On credit growth

On the impact of interest rate cuts on credit growth, Malhotra said that bank lending rates have already dropped by 71 basis points (bps) over the last four months to June. “While rates have come down significantly faster, impact on the real economy will also start to happen. So there is no reason to believe that this will not have growth inducing impact,” he said.

Malhotra said that while lower rates support credit growth, the transmission to the real economy takes time, especially in housing, which are long-term investments. He added that housing credit continues to perform well, although there are some fluctuations. “Overall housing credit is 14%, more than average credit growth of 10% that’s happening this year,” he said.