Inflation in control, focus on boosting demand: RBI guv

Mumbai: RBI appears to be leaning towards supporting economic growth. RBI governor Sanjay Malhotra views current economic conditions as conducive to easing, minutes of the central bank's monetary policy committee (MPC) meeting held on April 9, which were released on Wednesday, showed. With inflation hovering near the 4% target and growth still moderate, Malhotra argued that monetary policy should now focus on strengthening domestic demand to sustain and accelerate momentum.

The MPC voted unanimously to lower the policy rate by 25 basis points (100bps = 1 percentage point) and shift its stance to accommodative, reinforcing the central bank's growing confidence in inflation containment.

"Coming to the imposition of tariffs, in my view, the implications for inflation are two-sided. On the upside, uncertainties may lead to possible currency pressures resulting in imported inflation. On the downside, a slowdown in global growth will further soften commodity and crude oil prices, which would ease the pressure on inflation," said Malhotra. His comments point to a balancing act between external risks and domestic priorities, with the latter increasingly taking centre stage.

Voting for a cut in interest rates, Malhotra said, "Going forward too, considering the evolving growth-inflation trajectories, monetary policy needs to be accommodative."

A research note from Barclays described the minutes as 'dovish', pointing to RBI's continued liquidity operations since the April 9 meeting. These include bond purchases worth Rs 40,000 crore and long-dated variable rate repo operations totalling Rs 1.5 lakh crore. Amendments to the liquidity coverage ratio framework, effective from April 2026, are also expected to release Rs 1 lakh crore of loanable funds into the banking system.

Among MPC members, Nagesh Kumar stressed the need to stimulate private consumption and investment through both fiscal and monetary tools, particularly in an environment of persistent global uncertainty. He flagged a downgraded growth outlook for 2025-26 and warned that turbulence in global markets could dampen foreign direct investment and private capex. The recent decline in inflation, he argued, provides room for a more accommodative stance.

Saugata Bhattacharya acknowledged the risks posed by global trade disruptions and underscored the importance of supporting growth in the face of possible external shocks. He noted that unless trade tariffs are scaled back, both global trade and India's growth may weaken. However, he stopped short of recommending aggressive policy measures, citing the underlying resilience of domestic economic activity. He added that the RBI's liquidity actions would aid the transmission of interest rate changes.