RBI August MPC Meeting Minutes: Growth, Inflation and Policy Outlook

The Reserve Bank of India (RBI) released the minutes of its August Monetary Policy Committee (MPC) meeting. RBI Governor Malhotra noted that India’s economy is projected to grow at 6.5%.
While this growth is strong, the Governor mentioned that it is lower than India’s true potential.
External uncertainties, such as global tariffs and geopolitical tensions, remain a key drag on growth.

Inflation Trends Show Mixed Signals

According to RBI Deputy Governor Gupta, the fall in inflation was mainly due to deflation in food prices.

However, core inflation (which excludes food and fuel) is expected to stay above 4% in the near to medium term.

This means that price pressures in essential goods and services still exist.

MPC member Singh highlighted that average CPI inflation in FY 2025-26 looks benign, but core inflation is likely to remain sticky.

Members also agreed that inflation and growth outlooks remain uncertain, requiring careful policy decisions.

Global Risks Add Uncertainty

Several members pointed out concerns regarding export performance.
Ongoing trade disputes, tariff announcements, and lengthy negotiations are creating an environment of instability.

Preliminary calculations even suggest that US tariffs could reduce India’s growth rate by 20–30 basis points this year.

To reduce this risk, RBI members stressed the importance of diversifying export markets.

No Rush for Rate Cuts

The MPC maintained its neutral stance, giving flexibility to respond to future economic changes.
RBI official Ranjan and other members suggested it would be wise to wait for clear evidence of sustained inflation moderation before cutting rates further. Cutting rates too soon could also limit policy space in case of global shocks or domestic risks.

Member Bhattacharya raised concerns about the balance between loan and deposit rates, while Kumar suggested that lending rates may soften further in the coming months as transmission improves.

Key Takeaways

• India’s growth remains strong at 6.5% but faces risks from external demand issues.
• Food inflation has dropped, but core inflation is still above comfort levels.
• Export outlook remains highly uncertain due to tariffs and trade negotiations.
• RBI is cautious about further rate cuts, waiting for more clarity on inflation.
• Neutral policy stance ensures flexibility to respond to domestic and global changes.