India's central bank has declared a significant win in its ongoing efforts to control inflation, with Reserve Bank of India (RBI) Governor Sanjay Malhotra stating that the country has "won the battle against inflation," but warned that the broader war is still far from over. Speaking at a financial event in Mumbai on July 25, Malhotra emphasized the RBI’s continued commitment to price stability amid global and domestic economic uncertainties.
India's retail inflation dropped to a six-year low of 2.10 percent in June, comfortably within the RBI’s tolerance band of 2 to 6 percent. As a result of this sustained decline, the RBI revised its inflation forecast for the 2025–26 financial year to 3.7 percent. This includes quarterly projections of 2.9 percent in Q1, 3.4 percent in Q2, 3.9 percent in Q3, and 4.4 percent in Q4. Many economists believe the average inflation may fall even below these projections.
The positive inflation data has led to monetary policy easing. The RBI reduced the repo rate by 50 basis points in June, bringing it down to 5.50 percent. The central bank also cut the Cash Reserve Ratio (CRR) to support liquidity and growth. Market expectations indicate the RBI will likely hold the current rates at its next policy meeting on August 6, though further cuts later in the year are still on the table.
Despite this progress, the central bank remains cautious. Malhotra noted that various factors could reignite inflationary pressures, including global commodity price volatility, trade disruptions, and erratic weather patterns affecting food supply. Core inflation, which remains around 4.6 percent, also continues to be a concern.
India’s broader economic indicators remain strong. The RBI’s July bulletin showed a GDP growth rate of 7.4 percent in the final quarter of FY25, driven by gains in agriculture, services, and infrastructure. This growth momentum has attracted increased foreign investment in Indian government bonds, with July alone witnessing ₹129 billion (\$1.5 billion) in inflows.
However, the Indian rupee faces pressure amid a broader decline in Asian currencies, with expectations of it weakening further against the US dollar. Additionally, any delay or disruption in ongoing trade negotiations with the United States may affect investor confidence and export performance.
While the RBI’s inflation management has yielded impressive results, the central bank signaled it will maintain a vigilant, data-driven approach to future decisions. Policymakers will closely monitor upcoming inflation data, monsoon developments, and geopolitical trends before considering further monetary easing.
The next key policy announcement from the RBI is scheduled for August 6, when the central bank will reassess its stance based on fresh economic indicators.