RBI Holds Policy Rates Steady, Signals Confidence In India’s Growth-Inflation Mix; What Kept RBI in Wait-and-Watch Mode

RBI Keeps Policy Rates Unchanged, Signals Confidence in India’s Growth-Inflation Mix

The Reserve Bank of India’s (RBI) latest Monetary Policy Committee (MPC) decision to maintain the status quo on policy rates reflects confidence in the country’s growth and inflation dynamics, according to Dharmakirti Joshi, Chief Economist at CRISIL. Speaking exclusively to ANI, Joshi said the committee’s decision indicates satisfaction with the current economic momentum and the gradual normalisation of inflation.

Neutral Stance Signals Confidence in Economy

Joshi noted that the MPC’s continuation of a neutral stance suggests there is no immediate need to cut rates, despite the potential scope for such a move. “The committee is largely satisfied with the growth and inflation outcomes. Economic potential is close to 7 per cent, and RBI forecasts are in that range. While there was room to cut rates, it is unnecessary at this stage,” he said.

Awaiting New Base Year Data

An important factor behind RBI’s cautious approach, Joshi said, is the impending release of rebased consumer inflation and GDP data. “This rebasing is a major overhaul after a long gap and could affect estimates of economic size and growth pace. The central bank would prefer to factor in these changes before making firm projections for the coming financial year,” he explained.

Investment And Consumption Remain Supportive

Looking ahead, Joshi said investment will remain a key driver of growth, supported by measures announced in the Union Budget. Private consumption, particularly in rural areas, is also showing improvement due to good rainfall, healthy reservoir levels, and a favourable monsoon outlook. “Overall, the growth-inflation mix looks good even for the coming fiscal year,” he added.

Inflation To Normalise in FY27

Commenting on inflation, Joshi described FY26 as an unusual year, marked by very low inflation due to sharply declining food prices. Going forward, he expects inflation to rise slightly above 4 per cent in the first half of FY27, in line with RBI’s target. Normalisation of inflation, he said, would support higher nominal GDP growth, improve tax collections, and strengthen corporate balance sheets while keeping price pressures within comfortable limits.

Policy Measures Provide Incremental Support

On recent MPC measures, including the doubling of the collateral-free loan limit for MSMEs to ₹20 lakh and reviews of schemes like the Kisan Credit Card, Joshi noted that these steps provide incremental support to the economy and credit flow. “They may not make a huge difference, but they will have a positive impact,” he said.

Overall, Joshi concluded that India’s fiscal and monetary policy remain supportive of growth without triggering inflationary pressures. Greater clarity on the economic outlook is expected once the rebased inflation and GDP data are released, providing a clearer picture of the country’s growth potential.

(This article has been syndicated from ANI)