Comment on RBI credit policy by Ajay Garg, CEO, SMC Global Securities
Below the Comment on RBI credit policy by Ajay Garg, CEO, SMC Global Securities
In the latest Monetary Policy Committee (MPC) meeting, RBI has kept the repo rate unchanged at 5.5%. RBI has also retained the GDP growth forecast at 6.5% for FY26 despite rising global uncertainties, including trade tensions, protectionist measures, and tariff-related disruptions that continue to weigh on global trade and economic growth.
Amid a weakening rupee and growing uncertainty from new US tariffs, the RBI’s decision reflects a cautious approach. The central bank appears to be waiting for clearer signals on how these global developments could affect India’s export outlook. Tariff hikes in the US may lead to reduced demand for Indian goods, putting pressure on companies that rely heavily on exports and potentially impacting their earnings. While this could lead to some short-term uncertainty, the earlier rate cuts are expected to gradually deliver their full impact and support overall economic growth moving ahead.
However, strong domestic indicators offer a positive outlook. Improved automobile sales in June, rising rural consumption driving FMCG growth, and stable asset quality in the banking sector highlight the strength of rate-sensitive sectors. The upcoming festive season is also expected to provide a further boost to these sectors. With inflation forecast easing to 3.1% for FY26, driven by lower food prices and GDP growth forecast steady at 6.5%, the economy appears well-positioned to handle global headwinds. Additionally, the staggered rollout of the past CRR cut from September is expected to further support liquidity and strengthen overall economic momentum.
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