Economy outlook: RBI Governor at MPC meet says economy shows strength and stability; cautions on tariff uncertainty and inflation risk

The Indian economy presents a picture of strength, stability and opportunity, Reserve Bank Governor Sanjay Malhotra said at the Monetary Policy Committee (MPC) meeting earlier this month, while cautioning that monetary policy must remain vigilant amid evolving uncertainties around US tariffs.The Reserve Bank of India on Wednesday released the minutes of the MPC meeting held from August 4 to 6, where Malhotra and five other members voted to keep the short-term lending rate unchanged at 5.5 per cent, PTI reported.“Overall, our economy presents a picture of strength, stability, and opportunity. India’s strong fundamentals, growth-inducing policies, and forward-looking economic strategy clearly place it in a strong position,” Malhotra said, as per the minutes.

He added that while growth has been steady, inflation outcomes have turned more benign on the back of food price moderation.“Although we are likely to see inflation undershooting the target in the near term, with a likelihood of monthly numbers even crossing the lower tolerance band of 2 per cent, headline inflation is projected to inch up from Q3 onwards. The uncertainties of tariffs are still evolving,” he said, stressing the need for a watchful policy approach.

The Governor also noted that the cash reserve ratio (CRR) cut, which will come into effect from next month, would aid monetary transmission and support economic activity.Deputy Governor Poonam Gupta backed a status quo on rates, stating: “Taking into account the growth-inflation outlook, past actions, the state of the domestic economy, and the global dynamics, I do not see the scope or rationale for a further policy rate cut at this point.”

She favoured a neutral stance so that future actions remain data-driven.Executive Director Rajiv Ranjan observed that while growth remains resilient on the back of public capex, rural demand and steady services activity, industry continues to show uneven performance. “An additional rate cut at the current juncture could also reduce our policy space should global or domestic risks materialise,” he said.External members also supported the pause. Ram Singh stressed the importance of policy flexibility in a volatile environment, while Saugata Bhattacharya argued that given the fluid macro-financial situation, a pause was appropriate. Nagesh Kumar added that while benign inflation provides policy space, it was prudent to “wait and watch” the impact of transmission and trade policy shifts before acting further.The MPC, comprising Malhotra, Gupta, Ranjan, and three external members, met against the backdrop of easing inflation but persisting global and domestic growth concerns.