The Reserve Bank of India (RBI) has held its key policy interest rate steady at 5.5 per cent, while trimming its growth forecast for the current fiscal year from 6.7 to 6.5 per cent, citing rising global uncertainties—particularly those linked to U.S. trade policies under President Donald Trump. The decision was taken unanimously by the six-member rate-setting panel led by RBI Governor Sanjay Malhotra, who emphasized a cautious but balanced approach in the face of international volatility.
While Malhotra refrained from directly commenting on the 25 per cent tariff imposed by the U.S. on all Indian goods starting Thursday, he acknowledged that ongoing tariff threats and trade disruptions pose significant risks to India’s growth outlook. Trump’s administration has also warned of further hikes in response to India’s continued import of Russian oil.
“Prospects of external demand remain uncertain amidst ongoing tariff announcements and trade negotiations,” said Malhotra. He added that the economic headwinds stemming from persistent geopolitical tensions, volatility in global financial markets, and shifting trade alliances have all contributed to the revised forecast.
Despite these external pressures, Malhotra remained cautiously optimistic, stating that India’s domestic economy remains resilient, backed by strong fundamentals, policy buffers, and a proactive monetary stance. He stressed that the uncertainties around tariffs are still unfolding and have only been partially factored into current projections.
“Growth is robust and as per earlier projections, though below our aspirations,” he noted. “Opportunities are there for the taking, and we are making all efforts to create enabling conditions through a multi-pronged yet cohesive approach to policy making.”
The RBI also revised its inflation projection downward to 3.1 per cent from 3.7 per cent, even as it anticipates a possible uptick in headline inflation toward the end of the fiscal year. Malhotra reassured that the central bank will remain agile and responsive, tailoring its monetary policy to the evolving dynamics of inflation and growth while maintaining transparency and consistency in communication.
He concluded that as India advances toward its rightful place in the global economic order, the country will need robust, coordinated policies across sectors to safeguard and sustain its growth trajectory amidst a shifting international landscape.