RBI cuts to the chase

The Governor stuck to the long-held position of the central bank that interventions are only intended to smoothen "excessive and disruptive volatility rather than targeting any specific exchange rate level or bank".

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THE GOVERNOR STUCK to the long-held position of the central bank that interventions are only intended to smoothen "excessive and disruptive volatility rather than targeting any specific exchange rate level or bank".

The gross domestic product (GDP) growth for FY25 has been pruned by 20 basis points to 6.4% -- the slowest in four years. For FY26, it has been projected at 6.7% -- closer to the upper end of the Economic Survey's estimates last week. The inflation target has been maintained at 4.8% for the current year. For FY26, it is projected at 4.2%.

Malhotra said inflation will likely moderate in coming months, but highlighted risks from excessive volatility in global financial markets, uncertainty in global trade policies, and adverse weather events. While rural demand continues to improve, urban consumption remains subdued, he said.

The rupee gained 15 paise to close at 87.427/$, while 10-year government bond yields rose 5 basis points to close at 6.70%.

Analysts were largely appreciative of the policy. "There were conflicting demands going into the meeting. Soft domestic growth and falling inflation called for a monetary policy stimulus. But global uncertainty and high financial market volatility called for gradualism. We believe the RBI tread the fine line deftly," said Pranjul Bhandari, chief India economist, HSBC. Bhandari added that going ahead, they expect another 25 bps rate cut in the April policy meeting, taking the repo rate to 6%. CS Setty, chairman, SBI termed that the rate cut is timely, contextual and also well-communicated with respect to regulatory changes in transition to ensure a seamless and non-disruptive manner. "The RBI growth and inflation forecasts for FY26 clearly shows the delicate tradeoff between growth and inflation, he said."