RBI Monetary Policy Committee Begins Deliberations

The Reserve Bank of India's Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, has commenced its three-day meeting to deliberate on the upcoming bi-monthly monetary policy. The decision, set to be announced on August 6, comes at a time of heightened expectations and uncertainties regarding the impact of US tariffs and the potential for further rate cuts.

Experts Split on Rate Cut Expectations

With the RBI having already reduced the repo rate by a cumulative 100 basis points since February, economists are divided on the likelihood of further cuts. While some anticipate a pause in the easing cycle, others hold out hope for a 25 basis point reduction to support the economy amidst global and domestic challenges.

Inflation and Tariff Impacts Under Scrutiny

Bank of Baroda Chief Economist Madan Sabnavis highlighted the domestic consumption focus of India's economy, suggesting that the latest US tariffs might not significantly alter the RBI's policy stance. However, the potential for a slight downward revision in inflation projections was noted, alongside the critical role of oil prices in the Committee's considerations.

Industry Calls for Support Amid Export Challenges

Industry leaders, including Rohit Arora of Biz2X and Biz2Credit, emphasized the need for timely RBI intervention to mitigate the impact of US tariffs on MSMEs, particularly with the festive season approaching. A rate cut could provide crucial support to small exporters facing liquidity constraints.

Policy Panel Composition and Mandate

The MPC, comprising three RBI officials and three external members, operates under a government mandate to maintain CPI inflation at 4% with a 2% tolerance margin. With retail inflation remaining below 4% since February, the Committee's upcoming decision is eagerly awaited by markets and policymakers alike.