Status quo in August hinged on tariffs, rate-cut outcome

Uncertainties over the impact of the United States' (US') tariffs on India, along with the ongoing transmission of past rate cuts, prompted the members of the Reserve Bank of India's Monetary Policy Committee (MPC) to maintain the status quo during the August meeting, the minutes showed.

- MANOJIT SAHA

While some of the external members highlighted their concern over growth, the internal members cited the one-year headline inflation rate overshooting the 4 per cent target.

All the six members of the MPC unanimously decided to keep the policy repo rate unchanged at 5.5 per cent while maintaining the "neutral" stance.

"Uncertainty in external demand, driven by tariff and geopolitical uncertainty, remains the major drag on growth as it also hinders private investment intentions, which is yet to show visible signs of improvement," said Sanjay Malhotra, governor, RBI, in the minutes. He said monetary transmission, though hastened, was continuing in the midst of evolving uncertainties.

Deputy Governor Poonam Gupta, an internal member of the MPC, said heightened global uncertainties and structural factors seemed to be bigger constraints for new investment and consumption decisions. She was of the view that the cost or availability of funds was not deemed to be a material constraint to growth now.