Future policy action to hinge on growth-inflation dynamics'

At a time when US tariff uncertainty looms, RBI MPC member Nagesh Kumar calls for sharper export strategies, deeper free trade pacts, and stronger domestic production to navigate global trade disruptions and support growth in an email interview with Kshipra Petkar. Excerpts:

- NAGESH KUMAR, MEMBER, MONETARY POLICY COMMITTEE

With the repo rate cut by a cumulative 100 basis points since February 2025, how do you assess the pace of monetary transmission so far? What factors will influence future policy actions?

Given the lag in transmission, further softening of lending rates may happen in the coming months, especially given that liquidity continues to remain in surplus and as the effect of the cut in cash reserve ratio (CRR) is transmitted. While the case for stimulating private investments and urban demand remains and the benign inflation outlook provides policy space, one has to wait and watch as the transmission of the existing actions takes place and how the trade policy uncertainties play out before considering future policy actions. In other words, the future policy actions would be dependent on the evolving growth-inflation dynamic.

How are the recent US trade policy actions impacting private investment sentiment in India? What role may the ongoing diplomatic efforts play in resolving these uncertainties?