Mumbai: The Reserve Bank of India's (RBI) recent monetary policy committee (MPC) meeting minutes, released today, indicate a cautious optimism regarding the nation's economic trajectory. While the MPC maintained the key repo rate at 5.50%, the discussions suggest a readiness to ease monetary policy further, contingent on evolving economic indicators.
A significant development highlighted in the minutes is the decline in India's headline inflation to 1.54% in September, marking an eight-year low. This reduction is primarily attributed to a sharp decrease in food prices, including vegetables, fruits, and cereals. Consequently, the RBI has revised its inflation forecast for the fiscal year 2025–26 downward to 2.6%, from 3.1% in August and 3.7% in June. Governor Sanjay Malhotra noted that this benign inflation outlook provides the central bank with the flexibility to implement policies aimed at stimulating economic growth.
In response to robust economic activity, the RBI has also raised its GDP growth forecast for the current fiscal year to 6.8%, up from 6.5%. This upward revision reflects strong private consumption, increased government spending, and resilient services sector performance. However, the MPC remains vigilant about potential external risks, including the impact of U.S. tariffs and geopolitical tensions, which could pose challenges in the latter half of the year.
The minutes reveal a divergence of opinions among MPC members regarding the future course of monetary policy. While the majority favored maintaining the current "neutral" stance, two members advocated for an "accommodative" approach to support further easing. This internal debate underscores the committee's cautious approach, balancing the need to foster growth with the imperative to monitor global economic developments.
Looking ahead, the RBI's next policy review is scheduled for December 3–5, 2025. Market participants and economists anticipate that the central bank may opt for a 25 basis point rate cut, contingent on the persistence of favorable inflation trends and the absence of adverse external shocks. The evolving economic landscape will be pivotal in shaping the RBI's policy decisions in the coming months.