Current Event: No Interest Rate Adjustments - Sanjay Malhotra, RBI Governor, flags geopolitical stressors as potential threats to economic expansion
As we move through mid-2025, the Reserve Bank of India (RBI) continues to take a data-driven approach in its monetary policy, seeking to balance low inflation with growth support.
In June 2025, the RBI made a significant move by cutting the policy repo rate by 50 basis points to boost capital formation and economic growth, as inflation moderates sharply.
Inflation and Growth Projections
The Consumer Price Index (CPI) inflation for the Financial Year 2025-26 (FY26) is projected to be between 3.0% and 3.2%, significantly lower than the RBI's earlier forecast of 3.7%. The actual inflation for June 2025 stands at a provisional 2.10%, marking the lowest year-on-year figure since January 2019, with food inflation even showing deflation at -1.06%.
Economic growth remains robust, with Deloitte's August 2025 outlook forecasting India's GDP growth for FY26 to be between 6.4% and 6.7%. The economy grew 7.4% in Q4 of FY25, setting a strong pace supported by domestic demand, consumption, and easing inflation.
The RBI has projected real GDP growth for FY26 at 6.5%, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%. Real GDP growth for Q1FY27 is projected at 6.6%.
Repo Rate and Future Monetary Policy
Following the 50 basis points cut in June 2025, the repo rate currently stands lower (exact rate depends on previous levels, typically around 6-7% in early 2025 contexts). The Monetary Policy Committee (MPC) maintains that future monetary policy actions will remain data-dependent, aiming to safeguard the inflation target while supporting growth.
Additional Context
Inflation's sharp fall is partly attributed to favorable base effects and easing food and fuel prices. However, some inflation categories like housing, education, and health have shown steady or slight upticks. The RBI's inflation target framework aims for 4% CPI inflation with a tolerance band of ±2%, so current inflation near 2% falls at the lower tolerance boundary.
Policymakers appear focused on sustaining growth momentum through accommodative monetary policy, given the benign inflation outlooks and global uncertainties.
Upcoming RBI MPC Meeting
The details of the date, time, and live updates for the RBI MPC Meeting in August 2025 are yet to be announced. However, the RBI has continued with a neutral approach given global uncertainties and will closely monitor data for future decisions.
[1] RBI Press Release: Monetary Policy Statement, June 2025. [2] CPI Inflation Data, May 2025. [3] RBI Bulletin: Economic Review, June 2025. [4] Deloitte India Economic Outlook, August 2025. [5] RBI Monetary Policy Framework, 2024.
In the mid-2025 scenario, the RBI's data-driven monetary policy is geared towards balancing low inflation with growth support, as reflected in the projected CPI inflation for FY26 of 3.0% to 3.2%. Economic growth remains strong, with GDP growth forecasted between 6.4% and 6.7% in FY26.
Following a 50 basis points repo rate cut in June 2025, the current repo rate ranges around 6-7%, and the MPC emphasizes data-dependency in future monetary policy actions to safeguard the inflation target while fostering growth.
The inflation's sharp fall is partly due to favorable base effects and easing food and fuel prices, but some inflation categories are showing steady or slight upticks. The RBI's inflation target framework aims for 4% CPI inflation with a tolerance band of ±2%, while current inflation stands near 2%.
With inflation under control, policymakers are focused on sustaining growth momentum, especially considering global uncertainties. The upcoming RBI MPC Meeting in August 2025 is eagerly anticipated for future decisions, with the RBI maintaining a neutral approach in the face of global uncertainties.
In the realm of finance, banking, and business, such monetary policy moves can provide a conducive environment for trading, investment, and even the emerging DeFi sector, as interest rate, liquidity, and exchange rate volatility become key factors in market dynamics. Growth projections are positive for stakeholders in the mining, stocks, and portfolio management arenas.
Despite the robust economic outlook, inflation, growth, and monetary policy remain vital topics for discussion and analysis, given their significant impact on the overall health of the Indian economy. Reports, press releases, and economic reviews from reliable sources such as RBI and Deloitte offer valuable insights for investors, traders, and businesses in understanding market trends based on real data.
